UNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF NEW YORK

L.4;.72j."

JAMES CURKIN, On Behalf of Himself and : Civil Action No. OS-CV-2827(0)05)All Others Similarly Situated,

• CLASS ACTION •. AMENDED COMPLAINT FOR

VS. . VIOLATION OF THE FEDERAL. SECURITIES LAWS

HOWARD SOLOMON, et al.,••Defendants.•

,cr,

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No copyright is claimed in the text of statutes, regulations, and any excerpts from analysts' reports quoted within this -work.

•Copyright C 2005 by William S. Lerach and Lerach Coughlin Stoia Geller Rudman & Robbins LLP. William S.

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INTRODUCTION AND OVERVIEW

1. This is a class action for violation of the anti-fraud provisions of the federal

securities laws on behalf of all purchasers of Forest Laboratories, Inc. ("Forest" or the

"Company") common stock during 8/15/02-9/1/04 (the "Class Period"), who were damaged

thereby. Forest is a "specialty" pharmaceutical company that sells drugs (mostly, requiring a

physician's prescription) through a salesforce which "details," i.e., promotes, Forest's drugs

directly to physicians to persuade them to prescribe Forest's drug products to their patients. For

many years, Forest emphasized the sale of generic drugs, a very low-margin business. However,

during the 90s, Forest transitioned into a branded drug company, selling patented drugs which

had marketing exclusivity periods, allowing Forest to sell much higher priced and more

profitable drugs. Forest scored a great success following the 8/98 launch of Celexa (Citalopram),

a patented selective serotonin reuptake inhibitor ("S SRI") drug which Forest licensed from a

Danish company (Lundbeck) for sale in the United States. Celexa (known as Cipramil in

Europe), was approved by the U.S. Food and Drug Administration ("FDA") only to treat

depression in adults, i.e., persons 18 years of age or older. Celexa's great success boosted

Forest's revenues (up five times by 02) and profits (up from $37 million to $338 million for

Forest's fiscal year ended 3/31/02) and thus its stock price, which quadrupled from $10 to $40 by

early 02. 1 However, Celexa's great success also turned Forest into a "one-drug" company as, by

00-01, 70%-80% of Forest's sales and profits depended upon sales of this one drug alone.

2. As a patented drug, Celexa had a five-year exclusive marketing period, originally

to last until 9/03, after which "generic" Celexa would flood the market causing prices for the

Forest's stock split 2-for-1 in 1/03. All stock prices herein are split-adjusted.

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drug to plunge. Since Celexa's exclusive marketing period, which allowed Forest to charge very

high profitable prices for the drug, was to expire in 9/03, Forest's strategy was to work with its

licensor Lundbeck to develop a follow-on patented drug, Lexapro (Escitalopram) — which

contained the same active ingredient as Celexa and therefore would be essentially the same as

Celexa, but with sufficient claimed differences to justify the follow-on drug being granted a

patent and its own period of market exclusivity extending for years beyond when Celexa would

"go generic." This would also allow Forest to credibly claim that the new Lexapro drug was

superior in performance to Celexa in treating depression so as to justify physicians continuing to

prescribe Lexapro to patients notwithstanding its much higher price, compared to the essentially

identical generic Celexa. Once Lexapro was approved for sale by the FDA, Forest would stop

promoting Celexa, stop paying its salesforce to sell Celexa and have its salesforce, i.e., "detail

men," intensely work on physicians to get them to switch their Celexa patients to the new drug —

Lexapro — so that after Celexa "went generic" and prices for it plunged, Forest could continue to

charge very high and profitable prices for what was essentially the same drug — Lexapro — during

Lexapro's five-year exclusive marketing period. If Forest was not able to get physicians to

switch 70%-80% of their Celexa patients to Lexapro before Celexa went generic, Forest's profits

would be very adversely affected, as would its stock price.

3. The FDA approves prescription drugs only for specified, limited uses. Drug

companies are only permitted to promote or market drug products for those specified, limited

uses, i.e., they are forbidden from promoting or marketing drugs for any non-approved use.

However, physicians are permitted to prescribe a drug for any use they think beneficial for the

patient as long as the drug has been approved by the FDA for any use. This prescription

practice is known as "off-label" use of a drug. If physicians are persuaded that an approved drug

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can be beneficial to a patient for an unapproved use, they can and will prescribe the drug for that

"off-label" use. Such off-label use of a drug can constitute a significant portion of a drug's use

and thus boost a drug company's revenues and profits far higher than if the drug were prescribed

only for permitted uses, giving drug companies a strong economic incentive to market and

promote "off-label" use, even though this is illegal.

4. While Celexa had only been approved for use in adults 18 years of age or older,

and Lexapro would have only the same limited permitted use, Forest's executives knew that if

they could get physicians to prescribe Celexa and then Lexapro for childhood and adolescent

. depression, this would materially increase Forest's revenues and profits, as there are

approximately four million children and adolescents in the U.S. suffering from depression, and

during 02-03, some 11 million SSRI prescriptions were written annually for treatment of

depressed children or adolescents. Only one anti-depressant drug (Prozac) had been approved

for prescription use for children/adolescents. So if Forest could market Celexa/Lexapro to treat

depressed children/adolescents, it would vastly increase the size of the market for those drugs

and the revenues and profits that Forest could obtain from selling them. However, because

promotion of Celexa/Lexapro for childhood/adolescent depression was illegal due to concerns of

increased suicidality in that population with SSRI drug use, Forest had to be very circumspect in

this regard and keep its off-label promotional activities secret as, if Forest were caught engaging

in off-label promotion of Celexa, Lexapro or any other drug, it could face severe government

action, including large fines, as well as very negative publicity, which would hurt its business

and its stock price.

5. In order for the vital Celexa/Lexapro product transition strategy to succeed, Forest

wanted Celexa's exclusive marketing period to last as long as possible so that when Forest was

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permitted by the FDA to begin actively marketing Lexapro, Forest's salesforce would have as

long as possible to get physicians to switch their Celexa patients to Lexapro before generic

Celexa swamped the market, which would inevitably result in much lower prices for generic

Celexa, destroying the high profit margins Forest had enjoyed from selling that drug. Forest had

filed with the FDA for permission to market Lexapro for adults aged 18 years or older in 3/01.

By the Spring of 02, Forest's efforts to achieve FDA approval of Lexapro had reached the point

where Forest anticipated it would receive FDA approval to market Lexapro in 8/02-9/02.

6. Thus, in order to extend Celexa's exclusive marketing period by six months and

also create studies that its salesforce could use to promote and market Celexa/Lexapro for

treatment of childhood/adolescent depression, Forest (and its licensor, Lundbeck) undertook to

exploit a provision in U.S. law that permitted Forest to obtain an automatic six-month extension

of Celexa's exclusive marketing period by performing studies on Celexa in pediatric care —

funding such studies and having their employees involved in conducting those studies so they

could have knowledge of how the studies were progressing, influence the outcome of the studies

and control the public release and publicizing of such studies.

7. By late 01, Forest and Lundbeck had managed to complete one pediatric study on

Celexa, which purportedly showed that the drug improved depression in children/adolescents,

and wanted to publicize this study so that Forest's salesforce would have materials to use to

market Celexa and Lexapro, upon its upcoming introduction, for off-label under-18-years-of-age

use. Anticipating FDA approval to market Lexapro later in 02, Forest, in order to condition the

physician-prescribing community and influence securities analysts and investors, arranged for a

Celexa pediatric study to be presented at the Annual Meeting of Neuropsychopharmacologists in

12/01 and to publicize the presentation of that study by issuing a press release entitled "Results

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of escitalopram and Celexa studies presented at major scientific conference." According to

Forest's 12/13/01 release:

Forest Laboratories, Inc. announced that clinical study results werepresented today at an annual meeting of neuropsychopharmacologists, including. . . a pooled analysis of flexible-dose studies demonstrating that patients withmajor depressive disorder treated with either escitalopram or CelexaTM(citalopram HBr) showed significantly greater improvement than patientsreceiving placebo, and a study demonstrating that Celeaca may significantlyreduce depression in adolescents and children.

"Forest is committed to the development of effective medications for thetreatment of depression, and the results of these studies are especiallyencouraging," said Howard Solomon, chairman and chief executive officer,Forest Laboratories.

Celexa in the Treatment of Pediatric Depression

Celexa was shown to reduce symptoms of depression in adolescents andchildren with major depressive disorder to a significantly greater extent thanplacebo in a randomized, double-blind, placebo-controlled, flexible-dose study. . . . The study also showed that Celexa was well tolerated. . . .

"This study is significant because few studies involving anyantidepressant have shown efficacy compared to placebo in the treatment ofdepression in children and adolescents," said Karen Dineen Wagner, MD, Phd,Department of Psychiatry and Behavioral Sciences, University of Texas MedicalBranch at Galveston, and the study's lead author. "Citalopram is now one of thefew therapies for which we have data showing safety and efficacy for thispopulation."

8. As Forest's Lexapro marketing launch date approached during 02, in order to

continue to condition the physician-prescribing community and influence securities analysts and

investors, Forest again arranged for this favorable pediatric study to be publicly presented, this

time at the Annual Meeting of the American Psychiatric Association in Philadelphia on 5/18-

23/02. The Forest-sponsored and controlled study was entitled "A Randomized, Placebo-

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Controlled Trial of Citalopram [Celexa] for the Treatment of Major Depression in Children and

Adolescents." The study, of 83 children aged 7-11 and 91 adolescents aged 12-17, concluded:

In this population of children and adolescents, treatment with citalopramreduced depressive symptoms to a significantly greater extent that placebotreatment and was well tolerated.

Citalopram, an SSRI shown to be effective in the treatment of depressionin the adult population, appears well suited for use in children and adolescentsbecause it has a favorable side effect profile, a low potential for drug-druginteractions, and is relatively safe in overdose, which is of concern in thispopulation.

This study then observed:

It is tempting to speculate that similar clinical results would be achievedin children and adolescents treated with the recently developed single isomercompound escitalopram [Lexaproj, since the serotonin reuptake activity ofcitalopram is attributable to its S-isomer. . . .

The study concluded:

[Cjitalopram treatment significantly improved depressive symptoms comparedwith placebo within 1 week in this population of children and adolescents. Noserious adverse events were reported . . . . These findings further support theuse of citalopram in children and adolescents suffering from major depression.

9. In 8/02, Forest received FDA permission to market Lexapro to adults only.

Lexapro's formal marketing launch was set for 9/05/02. In 7/02, Forest issued a release that it

had obtained a six-month extension of Celexa's exclusive marketing period due to the

completion of a successful pediatric care study involving that drug. Due to Forest's prior

publicizing of a successful study of Celexa in pediatric populations, the implication was that this

study submitted to the FDA was successful. By reason of this study, the Celexa exclusive

marketing period, which was to have expired in 9/03, was extended until 2/04, which was

important to give Forest as much time as possible to persuade physicians to transition their

depressed patients from Celexa to Lexapro and also to give Forest's salesforce a study to use in

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the promotion of Celexa and its look-alike Lexapro (to be introduced in the next few weeks),

even though they were approved only for adults, i.e., persons over 18 years of age.

10. To further publicize its favorable pediatric care Celexa/Lexapro study, Forest

again arranged for a researcher from that study, Dr. Karen Wagner, to present the results of the

study at a major neuropsychopharmacology conference in late 8/02, just a few days before the

official marketing launch of Lexapro on 9/5/02, helping to arrange for publicity for that

presentation. The presentation was reported in Pediatric News, a medical publication distributed

to thousands of physicians, including those specializing in pediatric care. At that conference, Dr.

Wagner, on Forest's behalf, again claimed that the pediatric study of 83 children aged 7-11 and

91 adolescents aged 12-17 demonstrated substantial efficacy in the studied population without

significant adverse side-effects. Having now taken repeated steps to get this pediatric study into

the public domain to influence securities analysts and investors, as well as the physician-

prescribing community, Forest had its sales force promote Celexa and Lexapro to physicians for

use with childhood/adolescent patients.

11. Then, shortly after Lexapro was brought to market in 8/02, Forest again arranged

for publicity indicating that the active ingredient shared by Celexa and Lexapro was effective in

treating depression in minors with minimal adverse side effects in two separate studies, a

"booster shot" for marketing the drug as well as for Forest's stock. Forest arranged for the

publication of the following article concerning two studies it and its licensor, Lundbeck, had had

performed on children and adolescents in the 12/1/02 edition of Clinical Psychiatry News, which

stated:

Citalopram may help children's depression. (Minimal Side Effects).

. . . Citalopram may improve symptoms of major depressive disorder withminimal side effects in children and adolescents, according to two studies

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presented at the Congress of the Collegium Internationale Neuro-Psycho-pharrnacologicum.

The antidepressant was effective and well tolerated in a double-blind,placebo-controlled, flexible-dose study of 83 children and 91 adolescents, saidDr. Karen Wagner of the University of Texas, Galveston. Similar results wereobtained in a retrospective study of 76 South African children and adolescentsthat considered the safety and efficacy of the drug relative to other selectiveserotonin reuptake inhibitor antidepressants. . . .

The studies are among the first to consider the safety and efficacy ofantidepressant agents in children, noted Dr. Duncan Rodseth of Lundbeck.

The 8-week Texas trial compared 20-40 mg of citalopram with placebo inchildren and adolescents aged 7-17 years with major depressive disorder who hadexhibited symptoms for at least 4 weeks prior to enrollment.

In the South African study investigators reviewed data on 76 children andadolescents being treated with citalopram for an average of 102 days at dosesranging from 5 to 30 mg, Dr. Rodseth said. Minimal adverse effects wereobserved, he said.

12. During the Class Period, Forest indicated to the investment community that it did

not engage in promoting its products for "off-label" uses, stating that "[m]arketing our products

requires us to scrupulously inform physicians about those products. . . [in] communicat[ions]

with physicians [Forest] must always be accurate" and "not . . . abuse our access to

physicians." However, during the Class Period, while Forest was proclaiming and publicizing

the success of its Celexa/Lexapro transition and the success of the new Lexapro drug to the

financial community, it was illegally promoting Celexa/Lexapro for "off-label"

childhood/adolescent use and concealing its own study data (as well as other data available to it)

that indicated that SSRI anti-depressant drugs (including Celexa/Lexapro) did not work in

children/adolescents and were associated with increased suicidality in that population. Forest

did this because it knew that any widespread public realization that its SSRI anti-depressant

drugs, i.e., Celexa/Lexapro, were associated with increased suicidally of anyone — children,

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adolescents or adults — would have a major negative impact on prescription trends for Forest's

SSRI drugs, which would hurt investor perceptions of Forest's business, products and future

growth and thus hurt its stock price.

13. To compound this deceit, during the Class Period, Forest indicated to the

investment community that it released all drug studies, favorable or not. It stated "we always

release results as soon as we get them," "[w]hen there are [sic] any study that's material at

Forest, we release results as soon as we can," and "if it's not in our favor, it's not in our

favor." In publicizing its two short, small and purportedly successful Celexa/Lexapro pediatric

use studies in 12/01, 5/02, 7/02, 9/02 and 12/02 and then using them to improperly promote

Celexa/Lexapro for "off-label" childhood/adolescent use, Forest was concealing from

physicians, patients, parents, financial markets and even Forest's own salesforce that, during 96-

02, Lundbeck, the developer and licensor of Celexa/Lexapro to Forest, had conducted a large,

six-year study of Celexa's efficacy and safety involving over 422 children and adolescents

which had demonstrated that there was no pre-adult efficacy from the drug and — worse yet —

that there were significant adverse side-effects, including increased suicidality! Forest's

creation, publication, promotion and circulation of the "successful" Celexa/Lexapro pediatric

studies, while concealing the larger, longer, negative study, was deceptive conduct, as were

Forest's statements that Forest's strong Class Period financial results reflected "positive

physician response" to Lexapro and a "strong uptake in Lexapro prescription volume," when a

material portion of the drugs' sales were due to Forest's improper promotion of "off-label"

childhood/adolescent use while concealing its lack of efficacy and increased suicidality in that

population. As a result of these false statements, concealments and improper actions, Celexa's

exclusive marketing period was extended by six months. As Lexapro was formally launched in

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9/02, Celexa/Lexapro became the fourth largest anti-depressant drug prescribed for

adolescents, with such "off-label" use contributing approximately 10% of Forest's

Celexa/Lexapro revenues and profits during the Class Period.

14. As stated earlier, as Forest faced the end of Celexa's exclusive marketing period,

which it knew would soon bring massive generic competition, i.e., a flood of Celexa generics at

cheap prices, it was imperative that Forest get physicians to transition as many Celexa patients as

possible to Celexa's patented successor — Lexapro — as quickly as possible. For this to occur,

two things were indispensable. First, Lexapro had to be presented as sufficiently differentiated

from Celexa to justify patent protection and its own new five-year period of marketing

exclusivity. In addition, Lexapro had to be presented as sufficiently superior to its predecessor

Celexa in treating depression to justify physicians prescribing it at high prices even after low-

priced, generic Celexa became available. Thus, Forest constantly described Lexapro as different

from and functionally superior to Celexa in order to justify (i) patent protection and a five-year

period of marketing exclusivity for Lexapro, as well as (ii) a higher price for Lexapro compared

to the soon-to-arrive Celexa generics, greatly boosting Forest's reported revenues and profits

during the Class Period. To this end, during the Class Period, Forest said Lexapro was "quite

different" from and "superiorfi" to Celexa, as it had "greater effect" and was "more

efficacious." According to Forest, this "clinical differentiation" was a main "selling point to

physicians" to get them to "upgrade" patients from Celexa to Lexapro. In fact, so purportedly

superior was Lexapro to Celexa that Forest stated it was "not necessary" to initiate a study to

compare Lexapro to Celexa. In fact, however, these representations of Lexapro differentiation

and superiority were false and misleading, as Lexapro was pharmacologically virtually identical

to Celexa and its efficacy in its permitted patient universe for treatment of depression was not

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materially better than Celexa, which was why Forest did not want to perform any head-to-head

Celexa/Lexapro study.

15. As noted above, by 01, Forest was a one-product company with between 70%-

80% of its revenues and profits coming from Celexa sales, which had boosted Forest stock to all-

time high levels of $40-$41 per share in 7/01. However, as a result of investors' concerns over

Forest's dependence on Celexa/Lexapro, after reaching its then all-time high of $41.16 in 7/01,

Forest's stock moved "sideways" for months and, by the Spring of 02, was trading in the $30-

$40 per share range, reaching a low of $32.12 on 7/11/02, just before Forest announced that a

successful pediatric study of Celexa had enabled it to obtain a six-month extension of Celexa's

exclusive marketing period, which study, of course, created hope that Celexa/Lexapro could

ultimately be approved for childhood/ adolescent use, thus greatly expanding the market for,

revenues, and profits to be obtained from those drugs.

16. To continue to achieve the type of revenue and profit gains Forest had reported in

98-01, and which were necessary to push Forest's stock price higher, Forest needed to develop

and market another "blockbuster" drug, i.e., a high-revenue, high-profit patented prescription

drug. Forest's best hope in this regard was a drug known as Memantine2/Namenda, a drug that

Forest and its licensing partner (Merz from Germany) were developing to treat Alzheimer's

disease, a potentially huge market in the U.S., where few approved treatments then existed. In

11/02, Forest published a study showing Memantine/Namenda had modest efficacy with

moderate/severe Alzheimer's disease, at least in slowing progression of the disease. Based on

2 Pronunciation rhymes with "Oh my darling, Clementine."

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Forest's FDA filings for Memantine/Namenda, it was anticipated that Forest would receive FDA

approval to market that drug for moderate/severe Alzheimer's disease in 03.

17. As Forest received its six-month Celexa exclusive marketing extension,

publicized the success of Celexa and Lexapro in treating pediatric depression without adverse

side effects, successfully introduced Lexapro and was persuading physicians to switch large

numbers of patients from Celexa to Lexapro due to its purported superior efficacy in treating

depression, and anticipated FDA approval to market Memantine/Namenda for moderate to

severe Alzheimer's disease during 03 and favorable results from an ongoing

Memantine/Namenda study on mild/moderate Alzheimer's disease, Forest's stock took off.

After closing at $34.12 on 7/11/02, Forest's stock soared higher, reaching $54 in late 11/02 and

$61.35 by mid-6/03. As Forest's stock soared to these higher prices, its officers and directors

took advantage of the increasing artificial inflation in the price of the stock by bailing out, selling

some 2.27 million shares of Forest stock they owned, pocketing $111 million in illegal insider

trading proceeds.

18. Because by far the largest market for Forest's new Alzheimer's disease drug

would be in the mild category of the disease (45+% of cases), during 02 and 03, Forest told

analysts that it was conducting trials of Memantine/Namenda for mild/moderate Alzheimer's

disease, and that it anticipated favorable study results and expected later FDA approval for this

expanded use of Memantine/ Namenda. However, in 6/03, while Forest was in the midst of

seeking FDA approval for Memantine/Namenda for moderate/severe Alzheimer's, Forest was

forced to publish the results of the Memantine/Namenda mild/moderate study it had previously

told analysts it was conducting and reveal that that study had failed to show any efficacy in

treating mild/moderate Alzheimer's disease, a stunning disappointment. This development

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caused Forest's stock to plunge by over $8 per share from $61.19 on 6/18/03 to $52.85 on

6/19/03 — on large volume of 14,523,300 shares, the largest one-day stock price decline in

Forest's history! Shortly thereafter, Forest reported an apparent slowing of SSRI anti-

depression drug prescriptions in the summer of 03, which resulted in Forest's stock falling to as

low as $41.85 on 8/20/03, wiping out most of the stock's large gains from the beginning of the

Class Period when Forest had announced FDA approval of Lexapro and caused its small,

successful study regarding the pediatric use of Celexa to be publicized. This sharp collapse in

Forest's stock graphically demonstrated to Forest's executives that the investment community

would not tolerate disappointing news regarding Lexapro prescriptions or Memantine/Namenda

development. As Forest's stock plunged lower, Forest's insiders stopped their insider selling.

19. During 9/03 and 10/03, an FDA panel and then the FDA itself formally approved

Memantine/Namenda for moderate/severe Alzheimer's disease. Then, after a Pfizer study was

publicized in 8/03 showing its SSRI drug Zoloft — the largest selling SSRI anti-depressant drug

in the world and Celexa/Lexapro's most important competition — was beneficial to adolescents

with no increased suicide risk, Forest quickly publicized its own study on 12/10/03, representing

that Lexapro was as effective as Zoloft. Given Forest's prior publicizing of studies showing that

its Celexa/Lexapro drugs were effective in treating children and adolescents without adverse side

effects, this new Forest study indicating that Lexapro was as effective as Zoloft was very

significant to investors, as well as the physician-prescribing community. Forest's stock again

began to move higher.

20. Based on the FDA's 10/03 approval of the sale of Memantine/Namenda for

moderate/severe Alzheimer's disease, in 10/03-2/04, Forest began to manufacture

Memantine/Namenda to stock drug wholesalers and pharmacies with the drug, while intensively

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training its salesforce for Memantine/Namenda promotion, knowing that it would be permitted to

begin to actively market, i.e., detail, Mernantine/Namenda on or about 3/1/04. In anticipation of

the 3/1/04 formal marketing launch of Memantine/Namenda, on 1/7/04, to condition the

physician-prescribing community and impress investors and analysts, Forest publicized a new

study that indicated that Mernantine/Namenda had efficacy for patients suffering from

mild/moderate Alzheimer's disease, telling analysts and investors that this study would be

sufficient to obtain FDA approval to market the drug for that purpose, assuring them that it could

obtain FDA approval to market Memantine/Namenda for mild to moderate Alzheimer's disease

based on one successful study. Forest told analysts and investors — as well as the physician-

prescribing community — that, as a result of this successful study, it would file a supplemental

New Drug Application ("sNDA") with the FDA to approve the use of Memantine/Namenda for

the treatment of mild/moderate Alzheimer's disease in mid-04. This successful study was

especially significant coming after Forest had released the disappointing "failed" prior study just

months earlier in 6/03. Forest told investors and analysts that filing this important sNDA would

be a simple task, "bile basically just have to put the package together for all of the trials that

have been done . . . and file that . . . a six-month process to get that filing done." In fact, the

one positive study defendants could submit to the FDA was more than outweighed by the two

negative studies that had been conducted. As such, Forest was unable to complete the filing in

the timeframe stated by defendants and, when it was finally filed, Forest's application for the use

of Namenda for mild to moderate Alzheimer's was flatly denied by the FDA. As a result of this

extremely positive news, Forest stock skyrocketed from $61.50 on 1/6/04 to $71.09 on 1/7/04, on

huge volume of 9.9 million shares — Forest's stock's largest one-day increase in history — as

this new information indicated that Memantine/Namenda would, after all, end up being available

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for prescription to the entire spectrum of Alzheimer's disease patients — mild, moderate and

severe — a gigantic market — giving the drug a multi-billion dollar potential in a time frame

dictated by the mid-04 filing of an sNDA with the FDA Forest indicated it would make.

21. Then, on 2/23/04, just eight days before the 3/1/04 formal marketing launch of

Memantine/Namenda for moderate/severe Alzheimer's disease, Forest again . voluntarily

publicized the results of its new successful mild/moderate Memantine/Namenda test it had

already released on 1/7/04. This was done to further impress investors and analysts and to

condition the physician-prescribing community for Forest's planned promotion of

Memantine/Namenda for mild/moderate Alzheimer's and so that its salesforce would have

materials to direct physicians to, or to provide to physicians to get them to prescribe

Memantine/Namenda "off-label" for mild/moderate Alzheimer's.

22. As a result of these favorable representations during the Fall of 03, i.e., that

Lexapro was sufficiently superior to Celexa to justify a premium price and sufficiently different

in composition and action to justify its own patent protection and period of marketing

exclusivity, that Forest was successfully transitioning large numbers of Celexa patients to

Lexapro because of Lexapro's superior performance in treating depression, that Lexapro was as

effective as Zoloft (which had recently been reported by Pfizer to be beneficial in treating

depressed children and adolescents without any increase in suicidality), and that

Memantine/Namenda had been approved by the FDA for prescription use in moderate/severe

Alzheimer's disease patients and had now proven efficacious for mild/moderate Alzheimer's

disease patients leading to a mid-04 sNDA and anticipated FDA approval thereafter, Forest's

stock soared to its highest levels in history, skyrocketing from $41.85 on 8/20/03 to a Class

Period closing high of $77.59 on 1/26/04 — an 85% increase in the stock price and a $13-$14

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billion increase in aggregate market value in just jive months. As Forest's stock soared to

these higher, increasingly inflated levels, Forest's executives resumed their insider bail-out,

selling over 2.9 million shares of their Forest stock between 10/03-2/04 for almost $200

million, including 1. 7 million shares for $134 million at between $72-$77.42 per share in 1/04-

2/04, as Forest's stock traded at or near its historical peak!

23. Thus, by late 1/04, Forest executives had driven Forest's stock to by far its highest

price in history by improperly promoting and marketing Celexa/Lexapro and

Memantine/Namenda for off-label uses, while concealing studies they had or were aware of that

contradicted such off-label uses and Forest's claims of efficacy, lack of side effects and safety

for those drugs, thus misrepresenting the uniqueness, quality and efficacy of the Company's two

most important drug products to physicians, caretakers, patients, Forest's stockholders, securities

analysts and investors. However, in late 1/04, information began to enter the market indicating

that many of Forest's prior statements had been false and misleading and that Forest had engaged

in deceptive or misleading conduct, resulting in the artificial price inflation starting to come out

of Forest's stock price.

24. On 1/29/04, Forest was forced to reveal that the U.S. Attorney's office in

Philadelphia, acting on behalf of the Inspector General for the U.S. Office of Personnel

Management (which has oversight jurisdiction of the U.S. government's massive healthcare

plans covering some 10 million federal employees and their dependants), had subpoenaed

Forest's records concerning over-aggressive marketing of its drugs, including Celexa/Lexapro.

When interviewed by the media, the Assistant U.S. Attorney in charge of the investigation stated

that "the office of the inspector general gets involved when there's fraud, when you cross over

to misleading, deceptive or false statements or when there are kickbacks involved in

-16-

connection with the marketing." Just a few days later, on 2/2/04, an FDA panel held a hearing

regarding the risk of increased suicidality among adolescents taking anti-depressant SSRI drugs,

including Celexa/Lexapro, and, based on the evidence presented at the hearing, then quickly

took the highly unusual step of urging that strong suicide warnings immediately be placed on

the labels of SSRI anti-depressant drugs, including Celexa/Lexapro, even before formal FDA

review of this issue. Upon these initial revelations that Forest had been illegally or fraudulently

promoting and/or marketing its drugs for off-label uses and that its Celexa/Lexapro drugs were

so associated with increased suicidality as to require an immediate enhanced warning label, its

stock began to decline, and the artificial inflation in the price of the stock began to dissipate, as

the truth began to enter the market, damaging class members who had previously purchased the

stock.

25. In 3/04, the FDA warned U.S. doctors of an increased risk of suicidality with

SSRI drugs, specifically identifying Celexa and Lexapro. At the same time, Lundbeck revealed

that it had placed a prominent suicide warning on the Celexa drug in Europe for years,

although no similar disclosure or warning had been made by Forest in the U.S. Forest's stock

price continued to fall. In late 4/04, an extremely prestigious British medical organization's

Committee on Safety of Medicines ("CSM") published an important study documenting

increased suicidality among adolescents taking SSRI drugs, exposing the fact that certain

drug companies selling such drugs, including Forest, had concealed studies they had

previously performed showing that those drugs had no efficacy with children/adolescents but

increased suicidality. The British study, which received wide-spread publicity, specifically

concluded that Celexa had not demonstrated efficacy in treating depressed children/adolescents

and carried an increased rate of self-harm compared with a placebo, i.e., an unfavorable

- 17 -

risk/benefit balance. A major British medical publication, The Lancet, reported on the study and

stated as to Celexa that the CSM review provided

data from two unpublished trials on 422 participants with major depressivedisorder aged 7-18 years old (citalopram study 1 and 2). Efficacy data from thesetrials were limited, but suggested that citalopram [Celexa] was unlikely toproduce a clinically important reduction in depressive symptoms . . . . In termsof safety, citalopram increased the risk of attempting suicide . . . . With no goodevidence for efficacy and the potential for increasing the risk for suicide, therisk-benefit balance is unfavorable.

Forest stock continued to decline, falling to as low as $63.25 on 4/23/04, a decline of 18% from

its Class Period closing high price of $77.59 on 1/26/04, before this series of adverse revelations

began and additional artificial price inflation came out of the stock as more truth entered the

market.

26. As part of its ongoing effort to counter adverse publicity concerning

Celexa/Lexapro and differentiate Celexa/Lexapro from other SSRI depression drugs and their

association with suicidality, Forest had arranged for the 6/04 edition of The American Journal of

Psychiatry to publish the study Forest had conducted in 01 — and earlier publicized in 12/01,

5/02, 7/02, 9/02 and 12/02 — purportedly showing that Celexa/Lexapro was efficacious in

treating adolescent depression. However, within days after the 6/04 edition of The American

Journal of Psychiatry carrying this article was circulated, The New York Times published an

explosive exposé stating that the Forest-sponsored American Journal of Psychiatry article had

failed to include or present a much larger, more comprehensive study conducted by

Forest/Lundbeck during 96-02, which demonstrated that Celexa was not only not efficacious for

adolescent depression, it produced increased sucidality, and that Forest had concealed this

study from The American Journal of Psychiatry and that ForesULundbeck had not previously

publicly released or publicized this adverse study as it had favorable studies regarding

Celexa/Lexapro in treating depression in children/adolescents. As a public uproar erupted over

- 18 -

this deception by Forest, British health authorities demanded that Lundbeck/Forest surrender the

secreted Celexa adolescent study and Forest's stock continued to plummet. Now exposed, on

6/24/04, Forest was forced to reveal what it claimed was a "recently completed," second

Celexa/Lexapro study it had which also showed that Celexa/Lexapro was not efficacious in

treating adolescents! Forest stock continued to fall to as low as $57.10 on 6/28/04, which

securities analysts attributed to adverse revelations concerning Celexa/Lexapro and .adolescent

suicidality and the resultant slowing in growth of SSRI prescriptions by physicians.

27. On 6/29/04, Eliott Spitzer, the Attorney General of New York, requested that

Forest provide all documents it had regarding concealed clinical trials or tests and "off-label"

promotional activities for its drugs — a request which followed recently highly publicized legal

action by Spitzer's office against GlaxoSmithKline for fraudulent marketing of its SSRI drug —

Paxil — for adolescent use and GlaxoSmithKline's concealment of studies it had performed or

had showing that Paxil did not work with adolescents and caused increased suicidality.

28. On 8/5/04, The Wall Street Journal reported that in mid-7/04, the FDA had

concluded that its review of 25 prior clinical studies showed a clear link between SSR1 anti-

depressant drugs and an increase in adolescent suicidality, including Forest's Celexa/Lexapro

drug. During 7/04-8/04, a number of securities analysts that followed Forest cut their ratings on

Forest's stock, as well as their growth forecasts for Forest's revenues and profits, due to the

negative publicity surrounding Forest and SSRI drugs, including Celexa/Lexapro, which was

resulting in increased physician reluctance to prescribe the drug and slowing SSRI prescription

growth — including Celexa/Lexapro. Forest's stock continued to fall lower as the artificial

inflation continued to come out of the stock due to these negative revelations, exposing Forest's

-19-

prior false and misleading statements and illegal and deceptive conduct, and causing Forest's

stock price to drop to as low as $44.44 on 8/6/04.

29. By 9/1/04, investors and analysts realized that despite Forest's prior

representation that it would file an sNDA for Memantine/Namenda for the treatment of

mild/moderate Alzheimer's disease by mid-04, Forest had not filed the sNDA and thus

Memantine/Namenda would not be approved for active marketing or sale for use in patients with

mild/moderate Alzheimer's disease, at least not in the timeframe that Forest had previously

indicated, thus restricting the available market for that drug and the potential Forest revenues

and profits from that drug. Later, Forest did file an sNDA for Memantine/Namenda for

mild/moderate treatment of Alzheimer's, but the application was denied by the FDA as the drug

did not produce statistically significant results.

30. On 9/2/04, Forest stock traded as low as $41.10. Over the next few weeks,

slowing SSRI prescription growth due to suicidality concerns surrounding those drugs (including

Celexa/ Lexapro) and Forest being forced to agree to a settlement with the New York Attorney

General in order to avoid legal action by promising that it would in the future post all clinical

studies, favorable or unfavorable, on a publicly accessible Web site, including studies related to

Celexa/Lexapro, caused Forest's stock price to further decline, taking more artificial price

inflation out of the stock, finally reaching a low of approximately $36.10 on 11/22/04. Forest's

stock essentially completed a "round-trip" from its low of $32.12 on 7/11/02, at the outset of the

Class Period and the fraudulent scheme to deceive investors and artificially manipulate and

inflate Forest's stock price higher, which succeeded in pushing the stock to an all-time high and

grossly inflated closing price of $77.59 on 1/26/04, before the series of adverse revelations over

the next few months brought forth accurate and truthful information that exposed that Forest had

- 20 -

been lying about the qualities and capabilities of its two most important drug products, i.e.,

Celexa/Lexapro and Memantine/Namenda, while concealing its improper activities in promoting

and marketing those drugs for off-label uses to boost Forest's reported revenues and profits.

31. Investors who purchased Forest stock during the Class Period suffered damages,

as they purchased the stock at artificially inflated prices and the stock later declined as the true

facts came out in a series of negative revelations. However, Forest's top insiders, who

participated in, perpetuated or benefited from this scheme to defraud, did not do nearly so badly

for themselves. During the Class Period, Forest's top officers and directors, including those

named as defendants herein, sold 5,393,980 shares of Forest stock at as high as $77.42 per

share, pocketing over $314 million in illegal insider trading proceeds. Remarkably, these top

insiders unloaded 1,788,000 shares of Forest stock for $133 million during 1/04-2/04 at

between $72 and $77.42 per share, just as Forest stock hit its all-time high and grossly inflated

price due to defendants' illegal conduct.

32. On 2/1/05, it was reported in USA Today that:

Kids' antidepressant use declines

Massive publicity about antidepressants causing suicidal behavior inchildren is prompting more parents and doctors to hesitate longer or "just say no"to giving kids the pills, suggest new prescription records and interviews withdoctors.

In the last three months of 2004, the rate of patients under 18 who gotantidepressant prescriptions dropped 16% compared with the same time period in2003 . . . . There was a 19% drop in the third quarter of 2004 compared with thesame time frame in 2003.

In October, the Food and Drug Administration ordered "black box"labels, the most severe warning, on all antidepressants.

-21-

33. The statements made by Forest or on behalf of Forest between 8/02-9/04 were

false and misleading when made in their own right and for failing to disclose the following

adverse facts necessary to make the statements made not misleading:

(a) Forest was aware of a large multi-year study of Celexa for treating

childhood/adolescent depression performed by Lundbeck with Forest's knowledge, consent and

input, which showed that Celexa was not efficacious in that population and increased suicidality.

(b) Lexapro was not superior to or more efficacious than Celexa in treating

depression in adults 18 years or older, at least to any extent sufficient to justify the huge price

disparity between Lexapro and generic Celexa.

(c) Forest was improperly promoting and marketing Celexa and Lexapro for

an off-label use, i.e., treating depression in children/adolescents under the age of 18, which was

artificially boosting the sales of Celexa and making the introductory prescriptions for and sales

of Lexapro appear more successful than they would have been absent this improper off-label

promotion and marketing.

(d) Forest was improperly promoting and marketing Memantine/Namenda for

an off-label use, i.e., treatment of mild to moderate Alzheimer's disease, which was artificially

boosting the initial prescriptions for and sales of Memantine/Namenda, making the introduction

of that product appear more successful than it really was.

(e) Forest knew it would not be able to submit an sNDA for

Memantine/Namenda to the FDA to treat mild to moderate Alzheimer's disease by mid-04 as

represented, because Forest had two negative studies showing Metnantine/Namenda was not

efficacious for mild to moderate Alzheimer's disease and the positive data in Forest's possession

did not indicate sufficient efficacy for the drug for that use to obtain FDA approval for

- 22-

Memantine/Namenda in treating mild to moderate Alzheimer's disease, in light of those negative

studies.

(f) Forest did not promptly release clinical studies or tests on its drugs, but

rather, concealed and did not release or publicize negative studies on Celexa/Lexapro, while

going to great lengths to release and publicize favorable Celexa/Lexapro studies that were

contradicted by the concealed studies.

(g) Forest knew from internal data, as well as other materials available to it,

that the drugs Celexa/Lexapro were associated with increased suicidality in all user populations,

i.e., children, adolescents and adults, but concealed this information while promoting and

marketing those drugs to those populations and representing them to be well-tolerated in those

populations.

(h) Forest's reported successful financial results were due, in material part, to

Forest's promotion and marketing of Lexapro/Celexa for childhood/adolescent use and

Memantine/Namenda for mild/moderate Alzheimer's disease and physicians prescribing those

drugs for those off-label uses.

(i) The positive physician response Forest reported it was seeing in

connection with the introduction of Lexapro was due, in part, to Forest promoting and marketing

the drug for off-label childhood and adolescent use and physicians prescribing it for that use.

(0 Forest did not "scrupulously inform physicians about [its] products" or

"communicat[e]" with them in "accurate . . . ways that . . . serve their patients' interests," as it

was promoting and marketing Celexa/Lexapro for childhood/adolescent off-label use based on

studies it publicized and/or distributed showing well-tolerated efficacy in that population, while

-23 -

concealing other studies showing the drugs did not work in those populations and caused

increased suicidality.

(k) The fact that Lexapro/Celexa in combination commanded the highest

percentage of new SSRI prescriptions as Forest represented was not an "achievement attributable

first and foremost to the virtues of the products," as defendants stated, but rather was due in

substantial part to Forest improperly promoting and marketing those drugs for the treatment of

childhood and adolescent depression and the false claim that Lexapro "had a greater beneficial

effect" than Celexa in treating depression.

(1) To the extent Forest had compared Lexapro to Celexa for treating

depression, it found that Lexapro had no materially greater beneficial effect in treating

depression, but concealed this from both the physician-prescribing community and the

investment community.

(m) Forest's "message" was not, as defendants stated, "correct based on

carefully controlled experiments," making "Lexapro . . . so successful"; Forest had manipulated

its Celexa/Lexapro studies, publicizing ones that showed well-tolerated success with children

and adolescents, while concealing other studies (larger and better) that showed no efficacy and

increased suicidality.

(n) Forest was not only positioning Lexapro with physicians as the SSRI of

choice for new patients, non-responsive patients and patients suffering recurrent episodes of

depression, but also for the initial treatment of children and adolescents suffering from

depression.

(o) One of the reasons the Lexapro launch was going "exceptionally well" and

Celexa was continuing to sell well, and thus the two drugs were, in combination, gaining market

-24-

share was due to Forest's success in getting physicians to prescribe these drugs for off-label

treatment of childhood and adolescent depression.

34. The chart below shows the price action of Forest stock during the relevant period

and the events occurring relevant to the Company during that time frame:

-25-

8.5/02 Daniel media/me 18)4 swedieh Authorities conForest Laboratories Agency concludes Deface are not supported. Nc

Lessor° has no clear fuddled. Evidence for amens• January 3, 2001 - April 6, 2005 eh/sieges over Celan. 629/691EISMAXIS21366/21MLI

"chiral chimera • Prcmodon a

Stock Sales By FRX Officers/Defendants: % of Shares90 • . Shares Actually Owned 2/2/04 FDA hearing re:

SSRI suicide risk. Panel 2/230, mem1/29/04 US subpoena to FRX re.Defendant Position Sold Proceeds Sold overagareave merieting of recommends immediate f.,,,,,,bie N.John E. Eggers VP Finance & CFO 70,968 $ 4,393,629 58.9% Ceiextutexapro. US Attorney . tr'id.igy7nM' released.indicates fraud invoNed.Kenneth E. Goodman President & COO 500,000 $ 24,786,000 11.2% 1 n04-2/04• 1122104 Record 3rd Cr F04 EFS due to strong FRX shareElaine Hochberg Sr. VP - Marketing 223,456 $ 12,433,520 73.2% Leorpro sales. New ox ski* shows NemendiaLawrence S. Olanoff EVP - Scientific Affairs 337,256 $ 23,555,771 68.9% effectNe in mild/moderate Alzheimer's. Wil file

eNDA around middle of year. Lexapro superior to $7790Mary E. Prehn VP - Licensing 75,600 $ 4,346,940 88.3% Cole= 1/26/04

80 Howard Solomon Chairman & CEO 3,800,000 $221,311,514 36.7% 1/7104 Namenda now areilable to phrecians W 3/Raymond Stafford EVP - Global Marketing 155,000 $ 9,336,400 49.8% patients and pharmacies nadonvAde. hiFRX Study. Namenda works for mildAncderateCharles E. Trlano VP. Investor Relations 20.000 $ 1.491.400 100.0% Alzheimer's. tnAll seek FDA approval by mid.04.

4/04 I

5,182,280 $301,655,174 7/03 F03 Annual Report Scrupulous and euiciolo

accurate in marketing. Do not abuse access to 12,1 F., Celexiphysicians. Lexapro better than GrimmGreater beneficial effect Lexapro advantages 5tUdY - Lexie.

Lundbeck studies of 422 patents over other SSRM, based on carefully controlled .. eired,..t. iexperiments.

&loft. t I. ' i70 Total Insider Selling during 96-02. Celexa does not 6/19/03

II'•

Namenda fails inTotal Shares: 5,393,980 help adolescents and increases mild/moderate$61.36 0.0/rem,,'. tead.

Total Proceeds: $314 million risk of attempting suicide. Not 6/17 tcI /

publicly released by FRX. 5/03 Insiders sell., 511.40(1FRX shares ,e for $25 million. 4/20/04 FRX Record 4th41 FRX • 0 reeds Will aubmitmiklAnoderate Numerate= 60 .

co/15/03 1st Q F04SNDA around mid-year.

I= i Results - stowinge 10A2-11/02 Insiders sell growth for S6R1a. 1,720.112 FOX shores t

_. eagle Comdudina 1216/03 PROfor SO4 million ' ...I— mild/moderate Analyst Meetingse 6/1A/2 Article reports Atzheimer's awesOS Proxy //40 (Wegner) Study - 9/5/02 FRX

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•111' •-• requests "off label"-6' 12/13/01 FOX Clinkal Peer adolescents. No major Lexapro

for 558 m

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shres illion.children/adolescents. VVell 'moretolerated. 011/02 FOX Nes for effreicious.• 7/04 AnactFDA approval of f1/15/02 FDA 10/17/03 FDA ratings on FMementine/Nemende F...,„,,,,,.. ,..,...,...for moderate/revere ""---- ---.' approves Namenda for Stash neveradult depression. . mcderata/severe profit very\ AlzheimeAlzheimer's.

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30 r , Well tolerated. Zoloft beneficial tot l Wagner adolescents wth no6 study/Lundbeck South suicide Mk To add

1 SA2 FOX again publisises Celina 7117/02 FOX Morn strdy. Pediatric info to label.Pediatric Study (Wagner). Works gets 6 mon, lewith adolescents_ Vrell suited for markeenguse. Safe, no serious side effects exclueNityTempting to speculate similar extension for Class Period: 8/15102 - 9/1/04results with CeteraLexapro. doe to AltPediatric study,

I I I I I 1 I I I I I 2003-Jan-01 10-Aug-01 26-Mar-02 30-Oct-02 10-Jun-03 15-Jan-04

24-Apr-01 04-Dec-01 15-Jul-02 20-Feb-03 26-Sep-03 05-May-04IL ,...-...w.....:=........3...-.....,....z.,,,,,-;:a..":-...L..-

JURISDICTION AND VENUE

35. The claims asserted arise under §§10(b) and 20(a) of the Securities Exchange Act

of 1934 ("1934 Act") and Rule 10b-5. Jurisdiction is conferred by §27 of the 1934 Act. Venue

is proper pursuant to §27 of the 1934 Act. Forest is headquartered in New York City, false

statements were made here and acts giving rise to the violations complained of occurred here.

THE PARTIES

36. (a) Plaintiff Pace Industry Union — Management Pension Fund, purchased the

stock of Forest at artificially inflated prices during the Class Period and has suffered damages of

$862,876, as shown in the attached certification.

(b) Plaintiff Teamsters Affiliates Pension Plan purchased the stock of Forest

at artificially inflated prices during the Class Period and has suffered damages of $379,435, as

shown in the attached certification.

(c) Plaintiff UNITE H.E.R.E. Staff Retirement Fund purchased the stock of

Forest at artificially inflated prices during the Class Period and has suffered damages of

$247,395, as shown in the attached certification.

37. Defendant Forest has its executive offices in New York, New York. On 12/12/02,

Forest announced that its stock had begun trading on the New York Stock Exchange. The stock

had previously traded on the American Stock Exchange. Both these markets are "efficient"

markets.

38. (a) Defendant Howard Solomon ("Solomon") was Chairman and CEO of

Forest during all relevant times. During the Class Period, defendant Solomon sold 3,800,000

shares of his Forest stock, 37% of the shares he actually owned, for $221 million in insider

trading proceeds.

- 27 -

(b) Defendant John E. Eggers ("Eggers") was Vice President-Finance and

Chief Financial Officer of Forest during all relevant times. During the Class Period, defendant

Eggers sold 70,968 shares of his Forest stock, 59% of the shares he actually owned, for $4.3

million in insider trading proceeds.

(c) Defendant Kenneth E. Goodman ("Goodman") was President and Chief

Operating Officer of Forest during all relevant times. During the Class Period, defendant

Goodman sold 500,000 shares of his Forest stock, 11.2% of the shares he actually owned, for

$24.7 million in insider trading proceeds.

(d) Defendant Elaine Hochberg ("Hochberg") was Senior Vice President-

Marketing of Forest during all relevant times. During the Class Period, defendant Hochberg sold

223,456 shares of her Forest stock, 73% of the shares she actually owned, for $12.4 million in

insider trading proceeds.

(e) Defendant Lawrence S. Olanoff ("Olanoff") was Executive Vice

President-Scientific Affairs of Forest during all relevant times. During the Class Period,

defendant Olanoff sold 337,256 shares of his Forest stock, 69% of the shares he actually owned,

for $23.5 million in insider trading proceeds.

(f) Defendant Mary E. Prehn ("Prehn") was Vice President-Licensing and

Corporate Development of Forest during all relevant times. During the Class Period, defendant

Prehn sold 75,600 shares of her Forest stock, 88% of the shares she actually owned, for $4.3

million in insider trading proceeds.

(g) Defendant Raymond Stafford ("Stafford") was Executive Vice President-

Global Marketing of Forest during all relevant times. During the Class Period, defendant

-28-

Stafford sold 155,000 shares of his Forest stock, 50% of the shares he actually owned, for $9.3

million in insider trading proceeds.

(h) Defendant Charles E. Triano ("Triano") was Vice President-Investor

Relations of Forest during all relevant times. 'During the Class Period, defendant Triano sold

20,000 shares of his Forest stock, 100% of the shares he actually owned, for $1.49 million in

insider trading proceeds.

SCIENTER AND SCHEME ALLEGATIONS

39. During the Class Period, the defendants had both the motive and opportunity to

conduct fraud. They also had actual knowledge of the falsity of the statements they * made or

acted in reckless disregard of the truth or falsity of those statements. In so doing, the defendants

participated in a scheme to defraud and committed acts, practices and participated in a course of

business that operated as a fraud or deceit on purchasers of Forest stock during the Class Period.

40. The Individual Defendants were Forest's eight top executive officers charged with

not only developing Forest's business strategy, but also overseeing the implementation and

execution of that strategy during the Class Period. Due to the circumstances described in this

Complaint, nothing was more important to them than conceiving and then successfully

implementing and executing a new business strategy/model, as their jobs and millions of dollars

of bonuses and other benefits depended on their doing so, as, if they could do so, they stood to

pocket millions and millions of dollars in salaries, bonus payments and stock option profits. If

they did not, they knew their positions of power, prestige and profit at Forest would be in

jeopardy.

41. Forest knew that in Copenhagen before it began to market Lexapro, the Danish

Medicines Agency ("DMA") said that Lundbeck's second generation anti-depressant drug,

Cipralex (Lexapro), had no clear advantages to its top-selling predecessor Cipramil (Celexa).

- 29 -

42. As stated in a Reuters article in January 2004:

Denmark's pharmaceutical firm H. Lundbeck's new anti-depressant Cipralex isnot superior enough to its predecessor Cipramil to justify higher prices, scientistssaid. Lundbeck is pinning much of its future income to Cipralex succeeding itsoriginal blockbuster Cipramil which lost its European patent in 2002 and nowfaces cheap generic competition.

Declaring its new generation drug is more efficient than the old version,Lundbeck hopes to swap patients to the new pill while charging more for it.

A Swedish and an Australian scientists [sic] concluded in a studypublished in [2004's] first edition of the medical journal Psychotherapy andPsychosomatics that Lundbeck's statements are unfounded.

Cipramil accounts for around 80% of Lundbeck's total sales. In the US,where Cipramil is sold as Celexa, the patent expires in 2004.

Cipralex is retailed in the United States by Lundbeck's partner, ForestLabs under the name Lexapro.

43. On a quarterly basis, Forest held regional plan-of-action (POA) meetings for sales

reps, and held nationwide meetings on an annual basis, normally in October, in Florida.

Regional POA meetings lasted for approximately two to three days each quarter. Training for

these meetings was conducted by sales executives and/or either a product manager or an assistant

product manager from Forest's New York headquarters.

44. At the annual sales meetings in Orlando — lasting a week — COO/defendant

Goodman and CEO/defendant Howard Solomon attended with the entire team of nationwide

sales reps. Goodman and Solomon spoke to the team and provided an overview of the sales

training focus. The theme was sometimes conveyed by showing slides with pictures of an

internist or a child psychiatrist and then commenting that the internist is still writing too many

prescriptions for Zoloft or the child psychiatrist is not writing enough prescriptions for Celexa or

-30-

Lexapro. Sales reps then separated into groups of 40 or so in order to begin the training portion

of the meeting.

45. The sales reps received sales training at the meetings, which were in-line with

corporate objectives. Each quarter, the POA meetings, as well as the annual meetings, focused

on a specific message to promote their products. For instance, the goal for the quarter would be

to market Lexapro to doctors for anxiety, panic or pediatric depression, which were also off-label

indications. The quarterly focus or marketing message was oftentimes for off-label usage. If the

focus involved pediatric depression (sales reps were commonly instructed to market Celexa and

Lexapro for use in children), then the sales reps were instructed on how to overcome potential

doctor concerns or questions. These "scripts" were presented by the sales reps through role-

playing. The role-playing taught sales reps how to "get around" the fact that Celexa and Lexapro

were not approved for certain indications by proactively addressing the topic, i.e., off-label use.

46. Sales reps were given a script for informing doctors that Celexa and Lexapro were

safe for children and adolescents, which consisted of the following approach: "Zoloft [which

was approved for use in children] is an SSRI and Celexa/Lexapro are SSRIs, how different can

they be? Pfizer is a large company with time and money to devote to studies to show the

efficacy and safety for children, but you can rest assured that Celexa/Lexapro are both also safe

for children." The sales rep would actually provide the doctor with a copy of the study

conducted by Pfizer on Zoloft with specific paragraphs pre-highlighted. The representations

about the safety of Celexa/Lexapro for children and the study were proactively provided to

doctors by Forest sales reps; sales reps were not supposed to wait for inquiries from the doctors

but expected to provide these explanations up-front. In addition, managers would sometimes

- 31 -

accompany sales reps on visits and it was expected that the sales rep would follow the "script"

taught in the training meetings.

47. Forest sales reps were commonly provided with copies and instructed to distribute

journal articles for studies conducted by other companies for drugs in the same class, such as

other SSRls, for promotion of Celexa/Lexapro. As described above, the subject of the studies

conducted by other companies were for indications that had not been approved by the FDA for

Forest's product. In addition, sales reps were specifically instructed to highlight certain

paragraphs of the studies, and not to highlight others, as part of the sales training. Thus, Forest

reps distributed articles for competitor products, endeavored to convince doctors that the findings

applied to Forest's products, and that it was unnecessary to • waste money conducting the same

study. The practice of taking credit for other studies was called "piggy-backing." Forest reps

were also sent to the offices of child psychologists, despite the fact that neither Celexa or

Lexapro were approved for use in children.

48. The effort to promote Lexapro over Celexa when Celexa's patent was about to

expire was also intense. Sales reps were instructed to use the phrase, "Lexapro is Celexa on

steroids" to illustrate the increased efficacy of Lexapro. In addition, sales reps informed doctors

that studies showed Lexapro took effect after one to two weeks, whereas the other SSRIs

(including Celexa) took effect within four to six weeks. After Lexapro was launched, sales reps

told doctors who prescribed Celexa, including those prescribing to children, that if they felt

comfortable with Celexa, they should feel comfortable with Lexapro.

PRE-CLASS PERIOD EVENTS AND STATEMENTS

49. Celexa, Forest's flagship drug, which provided 70%-80% of Forest's revenues

and profits, had an exclusive marketing period which allowed Forest to charge very high and

very profitable prices for the drug, originally to last until 9/03, after which generic Celexa would

- 32 -

flood the market causing prices for the drug to plunge. Forest's business strategy was to work

with its licensor Lundbeck to develop a follow-on patented drug — Lexapro — which contained

the same active ingredient as Celexa and therefore would be essentially the same as Celexa, but

with sufficient claimed differences to justify the follow-on drug being granted a patent and its

own period of marketing exclusivity extending for several years beyond Celexa "going generic,"

and to allow Forest to credibly claim the new Lexapro drug was superior in treating depression

so as to justify physicians continuing to prescribe it to patients at much higher prices compared

to generic Celexa. Once Lexapro was approved for sale by .the FDA, Forest would stop

promoting Celexa and have its salesforce, i.e., "detail men," work on physicians to cause them to

switch their patients receiving Celexa to the new drug — Lexapro — so that after Celexa "went

generic" and prices for it plunged, Forest could continue to charge very high and profitable

prices for what was essentially the same drug — Lexapro — for several more years, during

Lexapro's five-year exclusive marketing period.

50. In order for this key product transition strategy to succeed, it was necessary that

Celexa's exclusive marketing period last as long as possible so that when Forest was permitted

by the FDA to begin to actively market Lexapro, Forest's salesforce would have many months to

get physicians to transition their Celexa patients to Lexapro. In 3/01, Forest filed with the FDA

for permission to market Lexapro for adults aged 18 years or older. By the Spring of 02, Forest's

efforts to receive FDA approval for Lexapro had reached the point where Forest anticipated it

would receive approval to market Lexapro in 8/02-9/02.

51. During 01, in order to attempt to extend Celexa's exclusive marketing period by

six months, Forest exploited a provision in applicable law that permitted it to obtain an automatic

six-month extension of Celexa's exclusive marketing period if it performed studies on the use of

-33-

Celexa in pediatric care by cooperating with its licensor, Lundbeck, and funding the studies so it

could influence their outcome, keep track of their progress and control the public release and

publicity concerning these studies. At that time, only one anti-depressant drug (Prozac) had been

approved for prescription to adolescents — a gigantic market, which, if Forest could market either

Celexa or Lexapro for, would vastly increase the size of the market for those drugs and the

revenues and profits that Forest could obtain from them.

52. By late 01, Forest had completed a pediatric study on Celexa which showed the

drug improved depression in children/adolescents and wanted to publicize the study so that its

salesforce could use it to use to illegally market Celexa and Lexapro upon its upcoming

introduction for off-label use for patients under 18 years of age. Thus, Forest arranged for this

study to be presented publicly, publicizing it by way of a 12/13/01 Forest press release, stating:

Results of Escitalopram and CelexaTM Studies Presented at Major ScientificConference

Forest Laboratories, Inc. announced that clinical study results werepresented today at an annual meeting of neuropsychopharmacologists, including. . . a pooled analysis of flexible-dose studies demonstrating that patients withmajor depressive disorder treated with either escitalopram or CelexaTm(citalopram HBr) showed significantly greater improvement than patientsreceiving placebo, and a study demonstrating that Cetera may significantlyreduce depression in adolescents and children.

"Forest is committed to the development of effective medications for thetreatment of depression, and the results of these studies are especiallyencouraging," said Howard Solomon, chairman and chief executive officer, ForestLaboratories.

Celexa in the Treatment of Pediatric Depression

Celexa was shown to reduce symptoms of depression in adolescents andchildren with major depressive disorder to a significantly greater extent thanplacebo in a randomized, double-blind, placebo-controlled, flexible-dose study of

- 34-

174 pediatric patients (83 children and 91 adolescents). . . . The study alsoshowed that Celexa was well tolerated. . . .

"This study is significant because few studies involving anyantidepressant have shown efficacy compared to placebo in the treatment ofdepression in children and adolescents," said Karen Dineen Wagner, MD, Phd,Department of Psychiatry and Behavioral Sciences, University of Texas MedicalBranch at Galveston, and the study's lead author. "Citalopram is now one of thefew therapies for which we have data showing safety and efficacy for thispopulation."

53. On 1/14/02, after Forest reported its 3rdQ F03 results, Dow Jones News Service

reported:

Forest Labs Oper Chief: Lexapro Better Than Celexa

Escitalopram, which Forest has filed to brand-name Lexapro, has "greatereffect, faster speed of action and fewer side effects" than Celexa, Goodman said.

Forest filed a new drug application with the Food and DrugAdministration for Lexapro last March and expects an approvable letter from theagency by the end of January. "We should be in a position to receive approvaland launch by the middle of this year," Goodman said.

54. On 1/15/02, after Forest reported its 3rdQ F03 results, Reuters reported:

Forest Laboratories Inc. said on Tuesday fiscal third-quarter profits rose about 33percent, beating Wall Street estimates, driven by strong demand for its flagshipantidepressant, Celexa.

The company hopes to leverage robust Celexa sales into developing itssolid pipeline of experimental drugs, led by escitalopram [Lexapro], anantidepressant intended to succeed Celexa, and Memantine to treat Alzheimer'sdisease.

-35-

55. On 4/2/02, Deutsche Bank issued a report "Initiating Coverage" on Forest after

discussions with Goodman and Eggers. It stated:

** Forest has clearly established itself as the leading worldwide specialtypharmaceutical company both in terms of product sales and market cap, driven bythe success of its antidepressant Celexa.

** The company now stands on the cusp of its next major growth driver, thenext generation antidepressant Lexapro . . . .

Lexapro — Improved Celexa a Major and Visible Near-Term Growth Driver

Licensed from Lundbeck for the U.S. market in 1997, Lexapro(escitalopram) is the single-isomer of Celexa for the treatment of depression. . . .[W]e anticipate market launch by mid-2002, which should enable Forest toconvert the vast majority of its existing Celexa franchise to Lexapro (which ispatent-protected through at least 2009) by early 2005, when the first generics toCelexa could potentially reach the marketplace. Currently, Celexa is protectedfrom generic competition by a five-year marketing exclusivity prior under theWaxman-Hatch Act that prohibits abbreviated new drug application (ANDA)filings until the expiration of the exclusivity period (which should occur inJanuary 2004, including a six-month pediatric extension).

56. On 4/24/02, Forest held a conference call for Forest shareholders, analysts, money

managers and the financial media. During the call, the following transpired:

[Goodman:] . . . In Alzheimer's, we are currently conducting three trials, all ofwhich are enrolling on schedule. In moderate to severe Alzheimer's [and] mild tomoderate Alzheimer's . . . .

The Lexapro launch is already being supported by pre-launch activities. Thatlevel of spend will ramp up as we embark on a national roll out, anticipatedaround mid-year, but as we have said previously, we plan to discontinuepromotion and sampling behind Celexa at the commencement of the nationalLexapro launch.

[Callen] . . . Iplo you ever plan to conduct and present a prospective studycomparing Lexapro and Celexa . . . to show superiority or is that not necessary?

[Goodman:] .. . I believe it is not necessary.

-36-

••

57. To condition the physician prescribing community for the upcoming introduction

of Lexapro, Forest arranged for the pediatric Celexa study to be publicly presented again, this

time at the Annual Meeting of the American Psychiatric Association in Philadelphia during 5/18-

23/02. The study was entitled "A Randomized Placebo-Controlled Trial of Citalopram [Celexa]

for the Treatment of Major Depression in Children and Adolescents." The study, of 83 children

aged 7-11 and 91 adolescents aged 12-17, stated:

Conclusions: In this population of children and adolescents, treatmentwith citalopram reduced depressive symptoms to a significantly greater extentthan placebo treatment and was well tolerated.

Citalopram, an SSRI shown to be effective in the treatment of depressionin the adult population, appears well suited for use in children and adolescentsbecause it has a favorable side effect profile, a low potential for drug-druginteractions, and is relatively safe in overdose, which is of concern in thispopulation.

(Footnotes omitted.) This study then gratuitously observed:

It is tempting to speculate that similar clinical results would be achievedin children and adolescents treated with the recently developed single isomercompound escitalopram [Lexapro 1, since the serotonin reuptake activity ofcitalopram is attributable to its S-isomer.

(Footnote omitted.) Thus, the study concluded:

[C fitalopram treatment significantly improved depressive symptoms comparedwith placebo within 1 week in this population of children and adolescents. Noserious adverse events were reported . . . . These findings further support theuse of citalopram in children and adolescents suffering from major depression.

58. On 7/17/02, Forest issued a release regarding the extension of Celexa's exclusive

marketing period due to a pediatric study it had performed on the drug:

Forest Receives Six-Month Extension on CelexaTM After FDA Review ofPediatric Data

. . . Forest Laboratories, Inc. announced today that the U.S. Food and DrugAdministration (FDA) has granted a six-month extension on the marketing

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exclusivity of CelexaTM (citalopram HBr). During this time, no application for ageneric version of Celexa will be accepted by the FDA. The earliest a genericapplication could be submitted would be January 2004 after which point theapplication would undergo a review process by the FDA.

Currently, there are no therapies approved for the treatment of majordepressive disorder in the pediatric population . . . — or 3.4 million children andadolescents under the age of 18. . . .

Given Forest's previous publicity concerning this study in 12/01 , and 5/02, it was obvious that

this study demonstrated that Celexa had been successful and well-tolerated in children and

adolescents.

CLASS PERIOD STATEMENTS AND EVENTS

59. As of the outset of the Class Period, the pre-class period statements pleaded in the

Pre-Class Period Events and Statements section above were alive, in the market and artificially

inflating the market trading price of Forest's stock.

60. On 8/15/02, Forest issued a release announcing it had received FDA approval to

market Lexapro for depression. It stated:

LexaproTM, the Single-Isomer of CelexaTM, Receives FDA Approval for theTreatment of Major Depression

. . . Forest Laboratories, Inc. announced today that LexaproTM(escitaloprarn oxalate), a powerful, effective and well-tolerated selective serotoninreuptake inhibitor (SSRI), has been approved by the U.S. Food and DrugAdministration (FDA) for the treatment of major depressive disorder. Forestexpects Lexapro to be available in pharmacies by September 5th.

61. Forest was set to launch Lexapro on 9/5/02. To further publicize the supposedly

successful Celexa/Lexapro pediatric care study, just before the Lexapro product launch and to

condition the physician-prescribing community and impress investors and analysts, Forest

arranged for the 9/1/02 edition of Pediatric News to contain an article on Celexa and its success

in treating depression in children/adolescents which stated:

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Celexa in Kids

Forest Laboratories Inc. was granted a 6-month extension on its marketexclusivity for the selective serotonin reuptake inhibitor Celexa (citalopramhydrobromide), after demonstrating its efficacy against symptoms of majordepression in 83 children aged 7-11 years and 91 adolescents aged 12-17years. . . . Celexa was well tolerated, Dr. Karen Wagner of the University ofTexas, Galveston, reported at a neuropsychopharmacology meeting.

62. As part of the formal marketing launch of Lexapro, on 9/5/02, Goodman appeared

on CNNfn's "Street Sweep" for an interview:

AL! VELSHI, CNNfn ANCHOR, STREET SWEEP: Forest Labs isbetting on a new drug to help boost its bottom line. Beginning today Lexapro isavailable to help treat depression. Forest Labs has been increasing revenue at arate of at least 30 percent over the past year. . . . For more on Forest Labs, I'Mjoined by the conipany's president Ken Goodman.

VELSHI: I hate to be cynical, but is this one of those moves that we'reseeing more and more from pharmaceutical companies to sort of change the makeup of drugs a little bit so that it defacto extends your patent protection by getting anew patent on a slightly different drug?

GOODMAN: No, actually, this is quite different . . . . So, for patientswe will have a drug that is more efficacious, acts more quickly, has lower sideeffects and has less drug interaction than the previous drug did.

63. On 9/12/02, Deutsche Bank issued a report on Forest after meeting with Goodman

and Eggers, who knew what they told Deutsche Bank would be reported to the investment

community. Reporting and repeating what Forest's executives had said to them, Deutsche

Bank's report stated:

Management Meetings Confirm Robust Outlook Supported by MultipleGrowth Drivers

• Earlier this week, we sponsored two days of investor meetings with ForestLabs, which has bolstered our confidence in the company's already solid near andlonger-term business outlook.

-39-

Last Thursday, September 5, Forest launched Lexapro, marking thecommencement of the company's campaign to convert Celexa patients to this newantidepressant prior to the emergence of generic competition . . . .

First, management indicated that the clear focus of its Lexapro marketingstrategy is to target both new patients and individuals who are either dissatisfiedwith or have failed to respond to current treatments. On this front, Lexaproshould likely benefit from a favorable side effect profile relative to the otherselective serotonin reuptake inhibitors (SSRIs) as the patient drop out rate due toadverse events was not statistically significantly different from placebo for the 10mg dose (data contained in label).

64. On 10/15/02, Forest reported its 2ndQ F03 results, i.e., the quarter ended 9/30/02,

via a release which stated:

Howard Solomon, Chairman and Chief Executive Officer of Forest, said:"In the recently completed quarter Forest's antidepressant franchise significantlyincreased through the continuing strength of Celexa, augmented in the quarter bythe successful launch in September of Lexapro. Although it is still early in thelaunch of Lexapro, we have experienced positive physician response and a stronguptake in Lexapro prescription volume."

65. On 10/15/02, Forest held a conference call for Forest shareholders, analysts,

money managers and the financial media, during which the following transpired:

[Goodman:] . . . [W]e are very encouraged by the uptake of Lexapro and theoverall market share gains for our antidepressant franchise.

. . . We are positioning Lexapro with [physicians as] the SSRI of choicewhen prescribing for new patients, those patients who are not responding to ornot tolerating other SSRIs, and patients who are returning to the market with arecurring episode of depression. . . .

. . . Let me remind everybody of the timing for generic competition toCelexa . . . . We have five years of Hatch-Waxman exclusivity, plus anadditional six months of exclusivity under the pediatric initiative.

We are also generating additional clinical data in both mild-to-moderateand moderate-to-severe Alzheimer's disease. . . .

As far as the promotional guidelines, the — you know, the difference in thepromotional guidelines are, from that [sic] Forest already had as its policies, are

- 40-

not that significant with respect to the overall ability to spend money as much asthey are with some of the changes in what we spend the money on.

66. In 12/02, Forest again arranged for publicity indicating that the active ingredient

shared by Celexa and Lexapro was effective in treating depression in minors with minimal

adverse side effects in two separate studies, a "booster shot" for marketing the drug as well as

for Forest's stock. Forest arranged for the publication of the following article concerning two

studies it and its licensor, Lundbeck, had had performed on children and adolescents in the

12/1/02 edition of Clinical Psychiatry News, which stated:

Citalopram may help children's depression. (Minimal Side Effects).

. . . Citalopram may improve symptoms of major depressive disorder withminimal side effects in children and adolescents, according to two studiespresented at the Congress of the Collegium Internationale Neuro-Psycho-pharmacologicum.

The antidepressant was effective and well tolerated in a double-blind,placebo-controlled, flexible-dose study of 83 children and 91 adolescents, saidDr. Karen Wagner of the University of Texas, Galveston. Similar results wereobtained in a retrospective study of 76 South African children and adolescentsthat considered the safety and efficacy of the drug relative to other selectiveserotonin reuptake inhibitor antidepressants. . . .

The studies are among the first to consider the safety and efficacy ofantidepressant agents in children, noted Dr. Duncan Rodseth of Lundbeck.

The 8-week Texas trial compared 20-40 mg of citalopram with placebo inchildren and adolescents aged 7-17 years with major depressive disorder who hadexhibited symptoms for at least 4 weeks prior to enrollment.

In the South African study investigators reviewed data on 76 children andadolescents being treated with citalopram for an average of 102 days at dosesranging from 5 to 30 mg, Dr. Rodseth said. Minimal adverse effects wereobserved, he said.

-41-

67. The statements made by Forest or on behalf of Forest between 8/02-12/02 were

false and misleading when made in their own right and for failing to disclose the following

adverse facts necessary to make the statements made not misleading:

(a) Forest was aware of a large multi-year study of Celexa for treating

childhood/adolescent depression performed by Lundbeck with Forest's knowledge, consent and

input, which showed that Celexa was not efficacious in that population and produced increased

suicidality.

(b) Lexapro was not superior to or more efficacious than Celexa in treating

depression in adults 18 years or older, at least to any extent sufficient to justify the huge price

disparity between Lexapro and generic Celexa.

(c) Forest was improperly promoting and marketing Celexa and Lexapro for

an off-label use, i.e., treating depression in children/adolescents under the age of 18, which was

artificially boosting the sales of Celexa and making the introductory prescriptions for and sales

of Lexapro appear more successful than they would have been absent this improper off-label

promotion and marketing.

(d) Forest did not promptly release clinical studies or tests on its drugs, but

rather, concealed and did not release or publicize negative studies on Celexa/Lexapro, while

going to great lengths to release and publicize favorable Celexa/Lexapro studies that were

contradicted by the concealed studies.

(e) Forest knew from internal data, as well as other materials available to it,

that the drugs Celexa/Lexapro were associated with increased suicidality in all user populations,

i.e., children, adolescents and adults, but concealed this information while promoting and

-42 -

marketing those drugs to those populations and representing them to be well-tolerated in those

populations.

(f) Forest's reported successful financial results were due, in material part, to

Forest's promotion and marketing of Lexapro and Celexa for childhood/adolescent use and

physicians prescribing the drugs for those off-label uses.

(g) The positive physician response Forest reported it was seeing in

connection with the introduction of Lexapro was due, in part, to Forest promoting and marketing

the drug for childhood and adolescent use and physicians prescribing it for that use.

(h) To the extent Forest had compared Lexapro to Celexa for treating

depression, it found that Lexapro had no materially greater beneficial effect in treating

depression, but concealed this from both the physician-prescribing community and the

investment community.

(i) Forest was not only positioning Lexapro with physicians as the SSRI of

choice for new patients, non-responsive patients and patients suffering recurrent episodes of

depression, but also for the initial treatment of children and adolescents suffering from

depression.

68. On 1/16/03, Forest held a conference call for Forest's shareholders, analysts,

money managers and the financial media, during which the following transpired:

[Triano:] . . . By way of a Safe Harbor statement . . . various remarks thatwe may make about future expectations, plans and prospects for the companyconstitute forward-looking statements within the meaning of the Private SecuritiesLitigation Reform Act of 1995, and actual results may be different. . . .

[Goodman:] We saw a dramatic expansion in our antidepressionfranchise, with total franchise sales of $4.52 million during the quarter. Of this,Lexapro contributed $81 million in sales, while Celexa sales were $371 million.The Lexapro launch, now 4 months old, is going exceptionally well and weexpect Leacapro to be one of the most successful launches in the industry. Wehave also been pleased with the performance of Celexa . . . . Since the launch

-43 -

of Leacapro in September, our combined antidepressant franchise has gainednearly 4 market share points within the SSRI category. . . .

All of the competing products have lost share since the Lexapro launch.Lexapro has gained about an 8 percent market share based on newprescriptions, half coming from Celexa, and the balance in roughly equalproportions from new patients and patients switched from other therapies.

I want to remind [everybody again of] the timing for the genericcompetition for Celexa. . . . We have 5 years of Hatch-Waxman exclusivity, [plusan additional] six months of exclusivity under the pediatric initiative.

69. On 4/22/03, Forest reported its F03 results via a release stating:

Forest Laboratories, Inc., an international pharmaceutical manufacturer andmarketer, today reported record revenues and earnings for its fiscal fourthquarter and twelve months ended March 31, 2003.

Howard Solomon, Chairman and Chief Executive Officer of Forest, said:"Our significant growth in earnings this past fiscal year was based principallyon increased sales of our highly successful antidepressant products — Celexaand Lexapro. Those products currently account for a higher and growingpercentage of new prescriptions for SSRIs than any other products in thecategory.

70. On 5/28/03, Forest President and COO Goodman spoke at the Freeman Billings

Technology & Growth Investor Conference. He stated:

[B]y way of a Safe Harbor statement . . . various remarks that we may make aboutfuture expectations, plans or prospects for the company constitute forward-looking statements, and actual results may be different.

I know most of you are up to speed on our outlook for the coming year aswe had discussed it recently on our end of year conference call. But I think wewill just quickly go through and distill some of next year's activities and what ourplans are for the year.

Let us talk about Lexapro. I think at this point it is apparent that Lexaprohas been and continues to be a very successful product launch. Its performancecontinues at or above our expectations. We anticipate that the advent of newcomparative clinical data and additional indications will serve to sustain if not

-44 -

accelerate its growth rate in the SSRI market It is our belief that Lexapro hasthe clinical differentiation and meaningful selling points to physicians that willenable it to become the leading market share product in the category. The levelof new prescriptions continues to grow as physicians are prescribing Lexapro.

More and more physicians are coming onboard all the time and gainingexperience with the product . . . .

71. The statements made by Forest or on behalf of Forest between 1/03-5/03 were

false and misleading when made in their own right and for failing to disclose the following

adverse facts necessary to make the statements made not misleading:

(a) Forest was aware of a large multi-year study of Celexa for treating

childhood/adolescent depression performed by Lundbeck with Forest's knowledge, consent and

input, which showed that Celexa was not efficacious in that population and produced increased

suicidality.

(b) Lexapro was not superior to or more efficacious than Celexa in treating

depression in adults 18 years or older, at least to any extent sufficient to justify the huge price

disparity between Lexapro and generic Celexa.

(c) Forest was improperly promoting and marketing Celexa and Lexapro for

an off-label use, i.e., treating depression in children/adolescents under the age of 18, which was

artificially boosting the sales of Celexa and making the introductory prescriptions for and sales

of Lexapro appear more successful than they would have been absent this improper off-label

promotion and marketing.

(d) Forest did not promptly release clinical studies or tests on its drugs, but

rather, concealed and did not release or publicize negative studies on Celexa/Lexapro, while

going to great lengths to release and publicize favorable Celexa/Lexapro studies that were

contradicted by the concealed studies.

-45 -

(e) Forest knew from internal data, as well as other materials available to it,

that the drugs Celexa/Lexapro were associated with increased suicidality in all user populations,

i.e., children, adolescents and adults, but concealed this information while promoting and

marketing those drugs to those populations and representing them to be well-tolerated in those

populations.

(f) Forest's reported successful financial results for Celexa/Lexapro were due,

in material part, to Forest's promotion and marketing of Lexapro and Celexa for

childhood/adolescent use and physicians prescribing the drugs for those off-label uses.

(g) The positive physician response Forest reported it was seeing in

connection with the introduction of Lexapro was due, in part, to Forest promoting and marketing

the drug for childhood and adolescent use and physicians prescribing it for that use.

(h) To the extent Forest had compared Lexapro to Celexa for treating

depression, it found that Lexapro had no materially greater beneficial effect in treating

depression, but concealed this from both the physician-prescribing community and the

investment community.

(i) Forest was not only positioning Lexapro with physicians as the SSRI of

choice for new patients, non-responsive patients and patients suffering recurrent episodes of

depression, but also for the initial treatment of children and adolescents suffering from

depression.

(j) One of the reasons the Lexapro launch was going exceptionally well and

Celexa was continuing to sell well, and thus the two drugs were, in combination, gaining market

share, was Forest's success in getting physicians to prescribe these drugs for off-label treatment

of childhood and adolescent depression.

-46 -

72. As Forest received its six-month Celexa exclusive marketing extension,

publicized the success of Celexa and Lexapro in treating pediatric depression without major

adverse side effects, was successfully introducing Lexapro, getting physicians to transition

patients from Celexa to Lexapro based on claims of superior efficacy in treating depression, and

anticipated FDA approval to market Memantine/Namenda for moderate to severe Alzheimer's

based upon favorable results from a Memantine/Namenda study on mild/moderate Alzheimer's,

its stock took off. Forest's stock, after closing at around $33 on 7/11/02, climbed higher,

reaching $54 in late 11/02 and $61.35 on 6/17/03. As Forest's stock soared higher, its top

officers bailed out, selling some 2.27 million shares of Forest stock they owned, pocketing $111

million in illegal insider trading proceeds.

73. However, from 6/03 to 8/03, a series of negative events unfolded which caused

Forest's stock to decline sharply. The largest market for Forest's Alzheimer's disease drug

would be in the mild category of Alzheimer's disease (45+% of cases). During 02 and 03, Forest

told analysts it was conducting trials of Memantine/Namenda for mild Alzheimer's disease,

expected favorable results and anticipated FDA approval of this expanded use of

Memantine/Namenda. However, in 6/03, while Forest was actively seeking FDA approval for its

Memantine/Namenda drug for moderate/severe Alzheimer's disease, Forest was forced to

publish the results of the Memantine/ Namenda mild/moderate study it had repeatedly told

analysts it was conducting and had to reveal that that study had failed to show any efficacy in

treating mild/moderate Alzheimer's disease, a stunning disappointment to the investment

community.

-47 -

74. On 6/19/03, Reuters reported on the results of Forest's mild/moderate

Alzheimer's study for Memantine/Namenda:

Alzheimer's drug did not improve cognition . . . .

. . . Forest Laboratories Inc. said on Thursday a clinical trial of anexperimental treatment did not significantly improve awareness and reasoning inpatients with mild to moderate Alzheimer's disease.

The trial results, which could slash the potential market for the mostimportant drug in Forest's pipeline, sent the company's shares tumbling 12percent

[Ilf only moderate-to-severe patients are administered the drug, it wouldseverely dent Forest's potential market.

"The hope was that if the data was really compelling, it could be used 'off-label' for mild-to-moderate patients," Lickrish [analyst at Punk, Ziegel & Co.]said.

About 4 million Americans have Alzheimer's disease, according to theAlzheimer's Association.

Recent data shows that moderate patients account for 38.5 percent of allafflicted, and severe patients comprise 16.5 percent, according to DeutscheBank's Steinberg. The remaining 45 percent are considered to have early formsof the disease.

75. On 6/19/03, Piper Jaffray reported:

Memantine Fails Mild-to-Moderate Alzheimer's Trial Key Points

• This morning, Forest announced that a recently completed clinical trialanalyzing the impact of memantine in mild-to-moderate Alzheimer'sdisease patients failed to demonstrate statistical superiority relative to theplacebo arm.

• What is unfortunate here is that Forest had hoped to position memantine asthe only agent approved for use in all Alzheimer's patients. . . .

• . . . [T]he results offer a distinct counter-detailing point for competingsales reps to point out if memantine finally reaches the market. As aresult, the level of off-label usage is likely to be lower than previously

-48 -

believed unless a monotherapy trial, to be completed later this year,produces strong results in favor of memantine.

76. On 6/20/03, Knight Ridder reported:

Experimental Alzheimer's Drug Fails to Improve Patients' Lives

An experimental Alzheimer's drug failed to improve the daily lives of patientswith mild to moderate cases of the brain disorder, Forest Labs said yesterday.

The news sent shares of Midtown-based Forest plunging $7.32 to $53.29.

"It's important Forest is a one-drug company right now" with itsantidepressant Celexa, said Michael Obuchowski, a portfolio manager at AshlandManagement,

77. This caused Forest stock to plunge by more than $8 per share from $61.19 on

6/18/03 to $52.85 on 6/19/03 — on exceptionally large volume of 14,523,300 shares — the largest

one-day stock drop in Forest's history as a public company!

78. On 7/15/03, Forest reported its lstQ F04 results via a press release. The release

warned of slowing growth in overall SSRI prescription rates "perhaps due to overall economic

conditions," which might hurt Forest's F04 EPS growth. However, the release also stated:

Howard Solomon, Chairman and Chief Executive Officer of Forest, said:"During the quarter our antidepressant franchise (Celexa and Lexapro) achievedthe leading current market share of both new and total prescriptions for SSRls.New prescriptions for Lexapro now exceed those of Celexa, and Lexapro'smarket share increase more than offset the share decline for Celexa. We lookforward to a continuation of Lexapro's strength in the market which has beendriven by consistent physician and patient response to the clinical attributes ofthe product."

79. On 7/15/03, Bloomberg reported:

Forest Labs Says 2003 Profit May Lag; Shares Drop

Forest Laboratories Inc., the maker of the Celexa antidepressant, saidprofit this year may fall short of forecasts because of slowing growth fordepression drugs. The company's shares tumbled 9.4 percent.

-49 -

"Maybe the fast growth in this company is done," said Charles Ryan, ananalyst for the BB&T Large Company Growth Fund, which holds 30,000Forest shares. "It's definitely a shock to me. This makes investors nervous."

Even with today's drop, Forest shares have gained 40 percent in the pastyear. They dropped $5.08 to $49.25 as of 4 p.m. in New York Stock Exchangecomposite trading. Today's drop wiped out almost all of the stock's gain in2003.

80. The disappointing development of the failed Memantine/Namenda mild/moderate

trial, together with an apparent slowing of SSRI prescriptions in the summer of 03, caused

Forest's stock price to fall to as low as $41.85 on 8/20/03, wiping out most of the stock's large

gains since the beginning of the Class Period on 8/15/02, when Forest had misleadingly caused

small, short pediatric use Celexa/Lexapro studies to be publicized while concealing the much

larger, longer and more comprehensive Lundbeck study which showed Celexa/Lexapro did not

work on depressed children/adolescents and caused increased suicidality. This sharp stock

collapse showed Forest's executives that the investment community would not tolerate

disappointing news regarding Lexapro or Memantine/Namenda. As Forest's stock plunged

lower, Forest's insiders stopped their insider selling, while undertaking renewed efforts to push

the stock back up much higher.

81. In mid-7/03, Forest issued its F03 annual report. It contained a letter from

Solomon, stating:

I wrote last year about integrity in business... . [T]here have been themost blatant, shameful frauds, so extreme it is astonishing that anyone couldconceive them or expect them to survive. . . . A good cleanup is timely.

[T]he potency of and the necessity for our products, and the fact that patients (andthe government that often pays the bill) have limited choices, does put a higherburden of responsibility on our industry than if we were selling confections. Weare dealing with health and pain and profound human happiness, and notentertainment. Marketing our products requires us to scrupulously informphysicians about those products. We are constantly communicating with

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physicians, but it must always be accurate and in ways that ultimately servetheir patients' interests. Above all, it is incumbent on us not to abuse our accessto physicians in ways that compromise their responsibility to their patients.

[O]ur successful results for the fiscal year that ended on March 31, 2003 ... arelargely based on our antidepression franchise — Lexapro and Celexa — whichtogether now command the highest percentage of new prescriptions in the SSRIcategory. That is an achievement attributable first and foremost to the virtuesof the products themselves. We had thought Celexa was the best of the SSRT's,but Lexapro, the S-enantiomer of Celexa, is even better.

We compared Lexapro to Celexa and were delighted to find that it had agreater beneficial effect . . . . And that is why Lexapro now accounts for over50% of new prescriptions for our antidepressant products and over elevenpercent of all new SSRI prescriptions only eight months after it wasintroduced. . . .

When we say Lexapro has advantages over other SSRI's, that means thatfor many patients it is less likely to have undesirable side effects, and it is morelikely to offer greater effectiveness. That is not true for all patients becausenothing is true for all patients but it is true for many patients. What that means isthat for those patients for whom their current treatment is flawed, withundesirable side effects, for example, they are more likely to do better if switchedto Lexapro. And for new patients the likelihood is that they will receive excellentresults if they are started on Lexapro. That is our message; it is correct based oncarefully controlled experiments, and based on physician experience. And thatis why Lexapro is so successful.

82. The statements made by Forest or on behalf of Forest during 7/03 were false and

misleading when made in their own right and for failing to disclose the following adverse facts

necessary to make the statements made not misleading:

(a) Forest was aware of a large multi-year study of Celexa for treating

childhood/adolescent depression performed by Lundbeck with Forest's knowledge, consent and

input, which showed that Celexa was not efficacious in that population and produced increased

suicidality.

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(b) Lexapro was not superior to or more efficacious than Celexa in treating

depression in adults 18 years or older, at least to any extent sufficient to justify the huge price

disparity between Lexapro and generic Celexa.

(c) Forest was improperly promoting and marketing Celexa and Lexapro for

an off-label use, i.e., treating depression in children/adolescents under the age of 18, which was

artificially boosting the sales of Celexa and making the introductory prescriptions for and sales

of Lexapro appear more successful than they would have been absent this improper off-label

promotion and marketing.

(d) Forest did not promptly release clinical studies or tests on its drugs, but

rather, concealed and did not release or publicize negative studies on Celexa/Lexapro, while

going to great lengths to release and publicize favorable Celexa/Lexapro studies that were

contradicted by the concealed studies.

(e) Forest knew from internal data, as well as other materials available to it,

that the drugs Celexa/Lexapro were associated with increased suicidality in all user populations,

i.e., children, adolescents and adults, but concealed this information while promoting and

marketing those drugs to those populations and representing them to be well-tolerated in those

populations.

(0 Forest's reported successful financial results for Celexa/Lexapro were due,

in material part, to Forest's promotion and marketing of Lexapro/Celexa for

childhood/adolescent use and physicians prescribing the drugs for those off-label uses.

(g) The positive physician response Forest reported it was seeing in

connection with the introduction of Lexapro was due, in part, to Forest promoting and marketing

the drug for childhood and adolescent use and physicians prescribing it for that use.

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(h) Forest did not "scrupulously inform physicians about [its] products" or

"communicat[e]" with them in "accurate . . . ways that . . . serve their patients' interests," as it

was promoting and marketing Celexa and Lexapro for childhood/adolescent off-label use based

on studies it publicized and/or distributed showing well-tolerated efficacy in that population,

while concealing other studies showing the drugs did not work in those populations and caused

increased suicidality.

(i) The fact that Lexapro and Celexa in combination commanded the highest

percentage of new SSRI prescriptions as Forest represented was not an "achievement attributable

first and foremost to the virtues of the products," as defendants stated, but rather was due in

substantial part to Forest improperly promoting and marketing these drugs for the treatment of

childhood and adolescent depression and the false claims that Lexapro "had a greater beneficial

effect" than Celexa in treating depression.

(i) To the extent Forest had compared Lexapro to Celexa for treating

depression, it found that Lexapro had no materially greater beneficial effect in treating

depression, but concealed this from both the physician-prescribing community and the

investment community.

(k) Forest's "message" was not, as defendants stated, "correct based on

carefully controlled experiments," thus making "Lexapro . . . so successful"; Forest had

manipulated its Celexa/Lexapro studies, publicizing ones that showed well-tolerated success

with children and adolescents, while concealing other studies (larger and better) that showed no

efficacy and increased suicidality.

(1) Forest was not only positioning Lexapro with physicians as the SSRI of

choice for new patients, non-responsive patients and patients suffering recurrent episodes of

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depression, but also for the initial treatment of children and adolescents suffering from

depression.

(m) One of the reasons the Lexapro launch was going exceptionally well and

Celexa was continuing to sell well, and thus the two drugs were, in combination, gaining market

share was due to Forest's success in getting physicians to prescribe these drugs for off-label

treatment of childhood and adolescent depression.

83. In 8/03, Pfizer, the manufacturer of Zoloft, the largest selling SSRI anti-

depressant drug in the world, publicized tests it had conducted which showed that Zola was

effective with children and adolescents without increasing suicidality. Pfizer also indicated it

would ask the FDA to allow it to include this "safety" information on the Zoloft label. Because

of the widespread use of Zoloft, this announcement received widespread publicity. On 8/27/03,

The Wall Street Journal reported:

Antidepressant Use for Kids Gains Support — New Research Shows ZoloftEases Debilitating Symptoms; Judging the Suicide Risk

MANY PARENTS FACE this quandary: When kids are seriouslydepressed, are they better off on antidepressants or not?

Amid recent concerns that the drugs could increase the suicide risk forkids, parents may find some reassurance in an article in this week's Journal of theAmerica Medical Association. New research reported there showed that theantidepressant Zoloft was modestly more effective than a placebo at easingmajor depression in children and adolescents, while showing no increase insuicide attempts.

Pfizer says it has received an FDA letter that likely will allow the company toadd the pediatric-safety information from the trials to Zoloft's label, but it stillhas to work out the wording with the FDA.

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84. On 9/24/03, Forest received FDA panel approval to market Memantine/Namenda

for moderate to severe Alzheimer's. On 9/25/03, Morgan Stanley reported:

FDA Advisory Panel Gives Memantine the Nod

This is clearly positive news for FRX

The FDA typically follows the panel's recommendation with respect to approvingnew drugs. Going into the meeting we were expecting a favorable outcome, butthe market was more skeptical and was obviously waiting for a nod from thepanel, as the stock jumped almost $4 on the positive recommendation.

85. On 10/14/03, Forest held a conference call for investors and analysts during

which the following transpired:

[Triano:] By way of a Safe Harbor Statement, let me add that variousremarks that we may make about future expectations, plans and prospects for the •company constitute forward-looking statements within the meaning of the PrivateSecurities Litigation Reform Act of 1995 and actual results may be different.

[Goodman:] We continue to be very encouraged by the strong physicianand patient satisfaction levels with Lexapro . . . .

We expect to see results from additional studies for Namenda in mild tomoderate Alzheimer's patients later this year. . . .

[David Larish — Analyst:] . . . [B]ased on the additional studies going on for themild to moderate, you indicated that they would be completed by year-end. Doyou anticipate when you might be in a position to release or discuss any of theresults?

[Goodman:] We always release results as soon as we get them. Whenthere are any study [sic] that's material at Forest, we release results as soon aswe can.

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[Corey Davis — Analyst] Just back to the mild to moderate study . . . .[I]f it doesn't work in your favor, do you still have an obligation to publish it, andI guess how widely would you disseminate it if it actually isn't successful?

[Goodman:] Well, I think from a scientific standpoint, we willdisseminate it in a responsible way, and certainly we will disclose the top lineresults when we get them. And if it's not in our favor, it's not in our favor.

86. On 12/8/03, Prudential Equity Group issued a report on Forest after meeting with

Goodman and Eggers, who knew the information they gave Prudential would be repeated aid

reported to the market in Prudential's report, which stated:

We recently had the opportunity to meet with FRX's management andwalked away feeling that things are tracking well at the company. The meetinglent support to our Overweight rating.

CELEXA/LEXAPRO: FLAGSHIP FRANCHISE POSITIONED FORCONTINUED GROWTH. Both FRX and the investment community continue tofocus of the conversion of older Celexa to newer Lexapro. There are currentlythree "levers" the company is pulling, or about to pull, to drive the continuedconversion of the franchise ahead of Celexa generics showing up . . . . WhereasFRX's strategy for the depression franchise has formerly been to stress totalfranchise growth, that has evolved to focus more on growing Lexapro marketshare using a combination of changes to its pricing strategy, sales forcepromotional incentives, and roll-out of new clinical research (comparingLexapro to competitors; soon to launch new indications that will differentiateLexapro from Celexa even further). The one issue that worries managementthe most is converting as much Celexa as possible before generics arrive. . . .The evolution of the conversion strategy is as follows:

• Initial strategy — Overall franchise growth.

• Initiated conversion process in September-03 quarter. Efforts started withFRX incentivizing their sales force to favor Lexapro growth in addition to overallSSRI franchise growth. During the quarter FRX also introduced Lexapro head tohead data versus competitor products.

• In the current December-03 quarter, reps are now being paid ONLY forLexapro growth, and new head to head data vs. Pfizer's . .. Zoloft, as well as anew Celexa to Lexapro switching study, are being rolled out for use in salespromotion.

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One of the components critical to Leacapro's rapid penetration has beenFRX's ability to generate supportive data against their primary competitors.Near term comparative data highlighted at the meeting included:

• New head to head comparison vs. Pfizer's Zoloft . As expected, thisstudy demonstrated that patients are able to get the full Lexapro effect at the 10mgstarting dose (i.e., without the need for dose titration).

NAMENDA: EXCITEMENT BUILDING FOR LAUNCH OF THISHEAVILY ANTICIPATED NEW DRUG FOR ALZHEIMER'S DISEASE.FRX should begin shipping Namenda to wholesalers within the next 2 weeks(orders expected to be "in house" by December 17th), with placement onpharmacy shelves by the last week of December or the first week of January.

87. On 12/9/03, Deutsche Bank issued a report on Forest after meeting with Goodman

and Eggers. Its report reflected what Goodman and Eggers told them. It stated:

• We recently sponsored a number of investors meetings with themanagement of Forest, which confirmed a number of potential developments overthe next several months to maintain a high level of interest in the shares.

We came away from these meetings with a sense that the outlook for Forest'sbusiness remains robust, with a number of potential developments over the nextseveral months to maintain a high level of interest in the shares.

Specific events include the impending launch of the new Alzheimer'streatment Namenda, improved visibility and perhaps an acceleration in theongoing switch from Celexa to Lexapro . . . .

Namenda Launch Imminent — Sales Force Expansion Ahead of Plan

With respect to the upcoming launch for Namenda, which received finalFDA approval just seven weeks ago for the treatment of moderate to severeAlzheimer's disease, Forest expects shipping to wholesalers to commence at theend of this month . . . with the drug being widely available in pharmacies by thesecond week of January.

Lexapro Rxs — Poised to Accelerate?

On the Celexa/Lexapro front, the company has already converted 64% ofnew prescriptions to Lexapro after 15 months of marketing. For the most recent

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week, Lexapro held a 16% share of new prescriptions in the U.S. depressionmarketplace versus a 9% share for Celexa, according to data from IMS America.While Forest has primarily focused on expanding its share of the depressionmarket with both Celexa and Lexapro since Lexapro's launch in September 2002,the company is now moving into the next phase of its marketing strategy with thisapproximate $2.1 billion antidepressant franchise with the implementation of amore aggressive switch campaign.

The other development that should aid Forest's switch campaign are theresults from the company's eight-week, 200-patient, switch study comparingLexapro and Celexa, which the sales force has only recently been utilizing.

88. Pfizer's 8/03 announcement that Zoloft was effective in treating children and

adolescents without adverse side effects was a very serious competitive blow to Forest, which

was counting on increased off-label use of Celexa/Lexapro for childhood and adolescent

depression to boost prescriptions of those drugs and Forest's sales and profits. In order to help

market Lexapro in competition with Zoloft and continue to boost Lexapro prescriptions by

physicians, on 12/10/03, Forest issued a release stating:

Starting Dose of LexaproTM as Effective as Optimally Dosed Zoloft® in theTreatment of Major Depressive Disorder

. . . Forest Laboratories, Inc. announced today the results of a clinicalstudy, which showed that LexaproTM (escitalopram oxalate) is as effective andwell tolerated as Zoloft® (sertraline hydrochloride). . . . Both Lexapro and Zoloftbelong to a class of antidepressants known as selective serotonin reuptakeinhibitors (SSR1s).

The study was presented in Puerto Rico at an annual meeting ofneuropsychopharmacologists.

Study Conclusions

Lexapro and Zoloft demonstrated comparable efficacy in reducingsymptoms of depression and anxiety in patients with major depressivedisorder. . . .

Both Lexapro and Zoloft were well tolerated . . . .

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89. During the Fall of 03, Forest's stock price again began to move higher, as an FDA

panel and then the FDA itself approved Memantine/Namenda for moderate/severe Alzheimer's

disease and as Forest published the results of its study on 12/10/03 that Lexapro was as effective

as the SSRI drug Zo loft, manufactured by Pfizer, after Pfizer's own Zoloft study represented it

was beneficial to adolescents with no increased suicidal risk.

90. On 12/11/03, RBC Capital Markets issued a report on Forest, which stated:

Additional Head-To-Head Data For Lexapro

Event

Forest releases head-to-head trial results comparing Lexapro with Zoloft.

Investment Opinion

• Positive Competitive Data. Forest released results from an eight-weekhead-to-head clinical trial demonstrating that Lexapro was as effective asZoloft in relieving the symptoms of major depressive disorder whileproviding the benefit of a simpler dosing regimen.

• Results Provide Effective Competitive Positioning. The trial resultscontinue the modest but important shift in promotional strategy for theForest sales team. Recall that Forest recently released head-to-headclinical data demonstrating that Lexapro was as effective as Effexor XRbut better tolerated. The release of the Zoloft head-to-head data is acontinuation of this theme and provides another source of competitiveinformation to aid the salesforce in effectively positioning Celexa versusits major competitors. The study is significant because Zoloft iscurrently the number one prescribed antidepressant in the US market.

91. The statements made by Forest or on behalf of Forest between 10/03-12/03 were

false and misleading when made in their own right and for failing to disclose the following

adverse facts necessary to make the statements made not misleading:

(a) Forest was aware of a large multi-year study of Celexa for treating

childhood/adolescent depression performed by Lundbeck with Forest's knowledge, consent and

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input, which showed that Celexa was not efficacious in that population and produced increased

suicidality.

(b) Lexapro was not superior to or more efficacious than Celexa in treating

depression in adults 18 years or older, at least to any extent sufficient to justify the huge price

disparity between Lexapro and generic Celexa.

(c) Forest was improperly promoting and marketing Celexa and Lexapro for

an off-label use, i.e., treating depression in children/adolescents under the age of 18, which was

artificially boosting the sales of Celexa and making the introductory prescriptions for and sales

of Lexapro appear more successful than they would have been absent this improper off-label

promotion and marketing.

(d) Forest did not promptly release clinical studies or tests on its drugs, but

rather, concealed and did not release or publicize negative studies on Celexa/Lexapro, while

going to great lengths to release and publicize favorable Celexa/Lexapro studies that were

contradicted by the concealed studies.

(e) Forest knew from internal data, as well as other materials available to it,

that the drugs Celexa/Lexapro were associated with increased suicidality in all user populations,

i.e., children, adolescents and adults, but concealed this information while promoting and

marketing those drugs to those populations and representing them to be well-tolerated in those

populations.

(f) Forest's reported successful financial results for Celexa/Lexapro were due,

in material part, to Forest's promotion and marketing of Lexapro and Celexa for

childhood/adolescent use and physicians prescribing the drugs for those off-label uses.

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(g) The positive physician response Forest reported it was seeing in

connection with the introduction of Lexapro was due, in part, to Forest promoting and marketing

the drug for childhood and adolescent use and physicians prescribing it for that use.

(h) To the extent Forest had compared Lexapro to Celexa for treating

depression, it found that Lexapro had no material greater beneficial effect in treating depression,

but concealed this from both the physician-prescribing community and the investment

community.

(i) Forest was not only positioning Lexapro with physicians as the SSRI of

choice for new patients, non-responsive patients and patients suffering recurrent episodes of

depression, but also for the initial treatment of children and adolescents suffering from

depression.

(j) One of the reasons the Lexapro launch was going exceptionally well and

Celexa was continuing to sell well, and thus the two drugs were, in combination, gaining market

share was due to Forest's success in getting physicians to prescribe these drugs for off-label

treatment of childhood and adolescent depression.

92. Based on the 9/24/03 FDA panel and 10/17/03 FDA approval of the sale of

Memantine/Namenda for moderate/severe Alzheimer's disease, during 10/03-2/04, Forest began

to manufacture Memantine/Namenda and stock drug wholesalers and pharmacies with the drug,

while training its salesforce for Memantine/Namenda promotion, knowing that it would be

permitted to begin to actively market, i.e., detail, Memantine/Namenda on or about 3/1/04. Even

though Forest could not legally market Namenda for mild to moderate Alzheimer's disease, in

anticipation of the formal marketing launch of Memantine/Namenda and to help condition the

physician-prescribing community to prescribe Namenda for "off label" mild to moderate use, on

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1/7/04, Forest publicized a new study which indicated that Memantine/Namenda was efficacious

for patients suffering from mild/moderate Alzheimer's disease, representing that this study

would be sufficient to obtain FDA approval to market the drug for that purpose, assuring them

that it could obtain FDA approval to market Memantine/Narnenda for mild to moderate

Alzheimer's disease based on one successful study alone. Forest told analysts and investors that,

as a result of this successful study, it intended to file an sNDA with the FDA to approve the use

of Memantine/Namenda for the treatment of mild/moderate Alzheimer's disease in mid-04. This

study was important, coming after Forest had released the results of the disappointing "failed"

Memantine/Namenda mild/moderate study on 6/19/03. As a result of this extraordinarily

surprising positive news, Forest stock skyrocketed from $61.50 on 1/6/04 to $71.09 on 1/7/04, on

huge volume of 9.9 million shares — Forest stock's largest one-day price increase in history — as

this new information indicated that Memantine/Namenda would, after all, end up being available

for prescription to the entire spectrum of Alzheimer's disease patients — mild, moderate and

severe — a gigantic market — giving the drug a multi-billion dollar potential.

93. On 1/7/04, Forest issued a press release regarding Namenda, stressing that

Forest's test showed the drug worked on patients with mild to moderate Alzheimer's disease:

NamendaTM (Memantine LICI) Mild to Moderate Alzheimer's DiseaseStudies Reported Today; Forest Laboratories to Seek Approval for Mild toModerate Indication By Mid-Year

. . . Forest Laboratories Inc. announced that results of a U.S., Phase IIIstudy of NamendaTM (metnantine HCI) as monotherapy in mild to moderateAlzheimer's disease show the drug demonstrated a statistically significantdifference versus placebo with respect to the study's primary efficacy measuresof cognition and global outcome. . . . Forest plans to seek approval for a mild tomoderate indication based on the positive outcome of the U.S. study.

94. Forest's unexpected announcement that Namenda, which had failed an earlier

mild/moderate Alzheimer's disease test, had now proved efficacious for this purpose and thus,

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according to Forest, would likely be approved for treatment for all stages of Alzheimer's disease

in a reasonably short timeframe, greatly increasing the revenue and profit potential for the drug

for Forest, sent analysts following Forest into a frenzy.

95. On 1/7/04, Bloomberg reported:

Forest Says Drug Has New Use in Study; Shares Rise

Forest Laboratories, Inc., less than two months after shipping its first U.S.memantine treatment for advanced Alzheimer's disease, said the drug eased lesssevere symptoms in a study. The shares jumped a record 14 percent.

Forest plans to use the research to request U.S. approval at mid-year for anew use of the drug in earlier stages of the disease, said Charles Triano, aspokesman for the company. Memantine, called Namenda in the U.S., is the onlydrug approved for treating moderate to severe Alzheimer's.

Approval for use in all Alzheimer's patients could double metnantine'srevenue potential to $1 billion annually, said Hemant Shah, an analyst at HKS &Co., Inc. New York-based Forest is counting on the drug as it faces possiblegeneric rivals for its top-selling Lexapro and Celexa antidepressants.

"This really expands the market," said Hemant.

Forest's shares rose $8.81 to $70.52 as of 4:16 p.m., their biggest one-daypercentage gain since they began trading on the New York Stock Exchange in1999.

96. On 1/7/04, Deutsche Bank issued a report on Forest:

Forest Laboratories, Inc.

New Namenda Results in Mild to Moderate Alzheimer's Increases Peak SalesPotential

• Forest announced positive results from a six-month Phase III trial ofNamenda as monotherapy in patients with mild to moderate Alzheimer's disease.As a result, Forest expects to file a supplemental New Drug Application with theFDA in mid-2004 to seek an expanded label for Namenda, which was approvedlast October for the treatment of moderate to severe Alzheimer's.

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• In light of today's news, we now believe that peak sales of Namendacould top SIB, versus our prior conservative peak sales forecast of $500M, asthe company now has the formal data to support Namenda as a treatment forthe entire spectrum of Alzheimer's, from mild to moderate to severe. There arean estimated 4.411/1 Alzheimer's patients in the U.S., the majority of whom sufferfrom mild to moderate forms of the disorder, implying at least a doubling of thetheoretical market opportunity for Namenda.

97. On 1/7/04, J.P. Morgan issued a report on Forest:

Forest Laboratories, Inc.

Delightful Upside: Mild-Moderate Namenda P3 Successful

• Unexpectedly positive news this morning out of Forest that its Phase IIIlabel expansion trial with Namenda in mild-moderate Alzheimer's Disease wassuccessful. . . .

. . . This one study is sufficient to file to file [sic] an sNDA in mid-2004for a label expansion from the current indication of moderate-severe Alzheimer'sto also include mild-moderate patients.

• This should provide another substantial lift for the stock as we, andmuch of the market, had been assuming that the study would not demonstratestatistical significance based on the previous two failed studies.

98. On 1/7/04, Prudential Equity Group issued a report on Forest. It stated:

FRX: NAMENDA DATA REMOVES RISK, STRENGTHENS PRODUCTPROFILE

HIGHLIGHTS

• New positive data on Namenda in patients with mild-to-moderateAlzheimer's Disease (AD) strengthens product profile and removes risk fromthe FRX story.

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99. On 1/13/04, Forest announced that Namenda was now available nationwide. Its

release stated:

NamendaTM (memantine IICI), First Drug Approved for Treatment ofModerate to Severe Alzheimer's Disease Now Available Nationwide

. . . Forest Laboratories, Inc. announced today that Namenda(TM)(memantine HCI), the first and only medication approved for patients withmoderate to severe Alzheimer's disease, is now available to physicians, patients,and pharmacies nationwide. . . .

100. On 1/20/04, Forest reported its 3rdQ F04 results via a release stating:

Howard Solomon, Chairman and Chief Executive Officer of Forest, said:"During this quarter several important events occurred for Forest. We receivedFood and Drug Administration approval for NamendaTM for the treatment ofmoderate to severe Alzheimer's disease . . . . We also reported positive resultsfrom a placebo-controlled study of Namenda in the treatment of mild tomoderate Alzheimer's disease which will serve as the basis of a potential labelexpansion."

101. On 1/20/04, Forest held a conference call during which the following transpired:

[Triano:] By way of a Safe Harbor Statement, let me add that variousremarks that we may make about future expectations, plans and prospects for thecompany constitute forward-looking statements within the meaning of the PrivateSecurities Litigation Reform Act of 1995 and actual results may be different.

[Goodman:] . . . [We reported a positive study outcome for our mild tomoderate monotherapy study for Namenda which will support a supplementalNew Drug Application for that indication around the middle of the year. This ismeaningful as it could lead to Namenda being the only approved product forthe entire spectrum of Alzheimer's patients. . . . Namenda was shipped duringthe quarter and pharmacies are now fully stocked. While we will not begindetailing the product until March 1st, physicians have begun prescribing theproduct and early prescription data is encouraging.

We continue to focus on upgrading patients from Celexa to Lexapro andduring the past three months have introduced to physicians several comparativeclinical studies in depression of Lexapro versus the main competitive products inthe category, Effexor, Zoloft and Celexa. . . . Upgrading patients from Celexa tothe superior Lexapro and making Lexapro the standard of care for thetreatment of both depression and anxiety remains a priority for us through2004.

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[Tim Chang, Schroeder Analyst] Okay. And what else do you need to doto file the supplemental NDA for Memantine for mild to moderate Alzheimer'sdisease, are you done with the trials?

[Goodman:] Trials are done. We basically just have to put the packagetogether for all of the trials that have been done from mild to moderate and filethat and that's probably a six month process to get that filing done.

102. As a result of these extraordinarily favorable representations during the Fall of 03,

i.e., that Lexapro was sufficiently superior to Celexa to justify a premium price and sufficiently

different in pharmacological composition and action to justify its own patent protection and

period of marketing exclusivity; that Forest was successfully transitioning huge numbers of

Celexa patients to Lexapro because of its superior performance; that Lexapro was as effective as

Zoloft, which had recently been reported by Pfizer to be beneficial to adolescents without any

increase in suicidality; that Memantine/Namenda had been approved by the FDA for prescription

to moderate/severe Alzheimer's disease patients and had now proven efficacious in a study for

mild/moderate Alzheimer's disease patients, which would lead to an sNDA and anticipated FDA

approval, Forest stock soared to its highest levels in history, skyrocketing from $41.85 on

8/20/03 to a Class Period closing high of $77.59 on 1/26/04 — an 85% increase in the stock price

and a $13-$14 billion increase in market value in just five months. As Forest's stock soared

higher, Forest's insiders resumed their insider bail-out, selling some 2.9 million shares of

their Forest stock for almost $200 million between 10/03-2/04, including 1.78 million shares

for $133 million at $72477.42 per share in 1/04-2/04, as Forest's stock traded near its highest

prices in history.

103. However, just as Forest's stock hit its all-time high, a series of negative

revelations began to come out that contradicted Forest's prior positive statements, assurances and

representations, exposing its prior improper, manipulative and illegal conduct. On 1/29/04,

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Forest revealed that it had received a subpoena from the Inspector General, U.S. Office of

Personnel Management, for documents related to Celexa. The Office of Personnel Management

is the federal government's human resources agency overseeing health benefits for some 10

million federal employees and retirees. On 1/29/04, Morgan Stanley issued a report on Forest,

stating: "According to management, the request was specifically for marketing materials. . . ."

104. On 1/30/04, Reuters reported:

James Sheehan, Assistant U.S. Attorney in Philadelphia, said Wyeth,Johnson & Johnson and Forest Laboratories, Inc., have been subpoenaed in aprobe relating to a potentially over-aggressive marketing of psychiatric drugs.

"The office of the inspector general gets involved when there's fraud,when you cross Over to misleading, deceptive or false statements or when thereare kickbacks involved in connection with the marketing," he said.

The subpoenas came from the Inspector General for the U.S. Office ofPersonnel management [the main watchdog for federal health programs to ensurethe beneficiaries of its program get the drugs they pay for and are treated with theright drugs for their condition], which investigates potential fraud involving thehealth benefits of about 10 million federal employees and retirees.

105. Then, just a few days later, on 2/2/04, an FDA panel held hearings on the

connection between SSRI drugs and suicidality. On 2/3/04, The New York Times reported:

A scientific advisory panel urged the Food and Drug Administration on Mondayto issue stronger warnings to doctors now about the possible risks to children ofa newer generation of antidepressant drugs, rather than wait until the agency'sreview of the drugs was completed.

Dr. Thomas Laughren, the team leader for the F.D.A.'s division ofneuropharmacological drug products, said that the agency took the panel'srecommendation "very seriously" and that it would probably issue such awarning "sooner rather [than] later."

About 11 million prescriptions for a group of newer antidepressantswere written for American children under 18 in 2002, according to the F.D.A.

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106. On 1/26/04, Forest's stock had hit its all-time and Class Period high of $77.90,

closing at $77.59. However, the partial revelations and adverse publicity of 1/29/04 and 2/2/04

caused Forest's stock to fall to as low as $72.75 as the artificial inflation in the stock's price,

caused by defendants' prior false statements, concealments and misconduct, began to come out

of the stock as the truth began to enter the market.

107. On 2/23/04, just eight days before Forest's 311/04 formal marketing launch of

Memantine/Namenda for moderate/severe Alzheimer's disease, Forest again voluntarily

publicized the results of the new successful mild/moderate MemantineNamenda test it had

already publicized on 1/7/04. This was done to impress investors and analysts and to further

condition the physician-prescribing community for Forest's promotion of Memantine/Namenda

for off-label use, i.e., for mild/moderate Alzheimer's, and so that its salesforce would have

materials to direct or refer physicians to, or to leave with physicians to get them to prescribe

Memantine/Namenda "off-label" for mild/moderate Alzheimer's. The Forest study indicated

that Memantine/Namenda was efficacious for mild/moderate Alzheimer's disease patients and

that therefore Forest would file an sNDA for that use by mid-04. Making this study public just

before the nationwide marketing launch of Memantine/Namenda enabled Forest's specialty

salesforce to promote the prescription of Memantine/Namenda for mild to moderate Alzheimer's

disease, thus greatly boosting the apparent initial success of the drug upon its introduction and

Forest's revenue and profits from that drug going forward. The 2/23/04 Forest release stated:

Researchers Report NamendaTM Provides Significant Benefits asMonotherapy to Patients With Mild to Moderate Alzheimer's Disease

. . . Forest Laboratories, Inc. announced that data from the first U.S.clinical trial evaluating NamendaTm (memantine HCI) as monotherapy for thetreatment of mild to moderate Alzheimer's disease were presented for the firsttime today at the American Association for Geriatric Psychiatry (AAGP) annualmeeting in Baltimore, Maryland. In this study, patients treated with Namenda

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performed significantly better than patients who received placebo on both primaryoutcome measures of cognition and global functions. . . .

"These results are good news for the Alzheimer's community becausethey suggest that using Namenda in the early stages of Alzheimer's disease maytranslate into a patient's ability to perform tasks such as communicating withcaregivers or remembering names and phone numbers for longer periods of timecompared to their ability if they did not receive treatment," said Elaine Peskind,M.D., an investigator on the study and Professor, Department of Psychiatry , andBehavioral Sciences, University of Washington School of Medicine. "AsNamenda has a mechanism of action distinct from the currently approvedtreatments for mild to moderate Alzheimer's disease and a favorable safety andtolerability profile, it promises to give physicians, caregivers, and patients a newand different treatment option for mild to moderate Alzheimer's disease basedupon FDA approval in the future."

Based on the positive results of this study, Forest Laboratories plans tosubmit to the U.S. Food and Drug Administration (FDA) a supplemental NewDrug Application for a mild to moderate Alzheimer's disease indication forNamenda in mid-2004.

108. In early 3/04, Forest announced the formal launch of Memantine/Namenda via a

press release and other public relations communications. As a result, Forest's stock was pushed

back up to $77.28 by 3/5/04.

109. In late 3/04, further adverse publicity emerged regarding the association of SSRI

antidepressant drugs, including Celexa/Lexapro, with increased suicidality. On 3/22/04, the

FDA issued a health advisory warning regarding SSRI drugs and suicidality. On 3/23/04, The

New York Times reported:

REGULATORS WANT ANTIDEPRESSANTS TO LIST WARNING

Patients taking antidepressants can become suicidal in the first weeks oftherapy, and physicians should watch patients closely when first giving the drugsor changing dosages, federal regulators said yesterday.

The warnings are part of a public health advisory issued by the Food and DrugAdministration and are a reminder that antidepressants, taken by millions aroundthe world, are not without risks. The agency is asking drug manufacturers toplace detailed caveats about the drugs' side effects prominently on their labels.

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Some psychiatrists said the new warnings were likely to slow sales,which amounted to about $12 billion worldwide in 2002, and would change howthe drugs were prescribed.

Dr. Regina Casper, a professor of psychiatry at Stanford, said that familyphysicians had become far too confident in the drugs' safety. . . .

"I think this will have a real sobering effect among family practicedoctors," Dr. Casper said.

While suicide is already mentioned in a rarely read portion of a sheetincluded with prescriptions for the antidepressants, the new discussion ofsuicide will be placed in the drug's warning section, the most important, widelyread and prominent section of the label. To further ensure that doctors willread the material, part of it will be in boldface. The label is the primary way theF.D.A. communicates with physicians about the safety and efficacy of drugs.

The drugs in the warning are: . . . Cele.xa and Lezapro, from Forest Laboratories. . . .

Forest's stock continued to decline upon these adverse revelations.

110. On 3/23/04, H. Lundbeck issued a release stating:

Lundbeck's development director says that for many years it hasincluded a warning that patients should be monitored for suicide risk in productdescriptions for its antidepressants sold in Denmark. This statement comes inthe wake of a demand by the FDA that a number of antidepressants sold in theUS, including Lundbeck's, should be accompanied with such a warning. Up untilnow there has been no warning with Lundbeck's antidepressants sold on theAmerican market by its partner Forest Laboratories.

111. On 4/20/04, Forest reported its 4thQ F04 and F04 results via a release stating:

Forest Laboratories, Inc. . . . today reported revenues and earnings for its fiscalfourth quarter and twelve months ended March 31, 2004.

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Howard Solomon, Chairman and Chief Executive Officer of Forest, said:"The just completed fiscal year was highlighted by strong performance from ourantidepressant category led by our SSRI Lexapro and by the recent launch ofNamenda, an NMDA receptor antagonist for the treatment of moderate to severeAlzheimer's disease. For the year Lexapro sales surpassed the $1 billion markand now account for more than two-thirds of the new prescription market sharefor our franchise. We anticipate further significant growth for this product andour franchise, which currently has the leading market share in the category, asphysicians continue to gain experience with and upgrade patients to Lexapro."

"The launch of Namenda this past quarter for moderate to severeAlzheimer's disease has been notable for the rapid early adoption of the productby physicians and resulting significant market share gains. Namenda's distinctmechanism of action, favorable side effect profile and unique indication in themoderate to severe disease category will continue to drive use. . . .

112. On 4/20/04, Forest held a conference call for Forest shareholders, analysts, money

managers and the financial media, during which the following transpired:

[Triano:] By way of a Safe Harbor Statement, let me add that variousremarks that we may make about future expectations, plans and prospects for theCompany constitute forward-looking statements with the meaning of the PrivateSecurities Litigation Reform Act of 1995 and actual results may be different.

[Goodman:] Namenda has exceeded our early projections. We are verypleased with the early read we have on the launch. Although the product hasbeen available in pharmacies since January we did not begin active detailing andsampling until March I, and have already seen a broad spectrum of patientsutilizing the product. . . . We have noted a broad early acceptance by primarycare physicians, in addition to neurologists and psychologists.

Also regarding Namenda we anticipate submitting a supplemental NewDrug Application for mild to moderate Alzheimer's disease late this summer . . .

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113. The statements made by Forest or on behalf of Forest between 1/04-4/04 were

false and misleading when made in their own right and for failing to disclose the following

adverse facts necessary to make the statements made not misleading:

(a) Forest was aware of a large multi-year study of Celexa for treating

childhood/adolescent depression performed by Lundbeck with Forest's knowledge, consent and

input, which showed that Celexa was not efficacious in that population and produced increased

suicidality.

(b) Lexapro was not superior to or more efficacious than Celexa in treating

depression in adults 18 years or older, at least to any extent sufficient to justify the huge price

disparity between Lexapro and generic Celexa.

(c) Forest was improperly promoting and marketing Celexa and Lexapro for

an off-label use, i.e., treating depression in children/adolescents under the age of 18, which was

artificially boosting the sales of Celexa and making the introductory prescriptions for and sales

of Lexapro appear more successful than they would have been absent this improper off-label

promotion and marketing.

(d) Forest was improperly promoting and marketing Memantine/Namenda for

an off-label use, i.e., treatment of mild to moderate Alzheimer's disease, which was artificially

boosting the initial prescriptions for and sales of Memantine/Namenda, making the introduction

of that product appear more successful than it really was.

(e) Forest knew it would not be able to submit an sNDA for

Memantine/Namenda to the FDA to treat mild to moderate Alzheimer's by mid-04, as

represented, because Forest had two negative studies showing no efficacy for

Memantine/Namenda for mild/moderate Alzheimer's disease and the positive data in Forest's

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;

possession did not indicate sufficient efficacy for the drug for that use to obtain FDA approval

for Memantine/Namenda in treating mild/moderate Alzheimer's disease, in light of those

negative studies.

Forest did not promptly release clinical studies or tests on its drugs, but

rather, concealed and did not release or publicize negative studies on Celexa/Lexapro, while

going to great lengths to release and publicize favorable Celexa/Lexapro studies that were

contradicted by the concealed studies.

(g) Forest knew from internal data, as well as other materials available to it,

that the drugs Celexa/Lexapro were associated with increased suicidality in all user populations,

i.e., children, adolescents and adults, but concealed this information while promoting and

marketing those drugs to those populations and representing them to be well-tolerated in those

populations.

(h) Forest's reported successful financial results were due, in material part, to

Forest's promotion and marketing of Lexapro and Celexa for childhood/adolescent use and

Memantine/Namenda for mild/moderate Alzheimer's and physicians prescribing those drugs for

those off-label uses.

(i) The positive physician response Forest reported it was seeing in

connection with the introduction of Lexapro was due, in part, to Forest promoting and marketing

the drug for childhood and adolescent use and physicians prescribing it for that use.

To the extent Forest had compared Lexapro to Celexa for treating

depression, it found that Lexapro had no materially greater beneficial effect in treating

depression, but concealed this from both the physician-prescribing community and the

investment community.

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(k) Forest was not only positioning Lexapro with physicians as the SSRI of

choice for new patients, non-responsive patients and patients suffering recurrent episodes of

depression, but also for the initial treatment of children and adolescents suffering from

depression.

114. On 4/23/04; Bloomberg reported on a just-completed major study by British

medical authorities linking SSRI drugs to increased suicidality and condemning drug companies,

including Forest, for concealing studies they performed and/or had showing that SSRIs had no

beneficial impact on depressed children/adolescents and, in fact, increased suicidality in that

population:

Antidepressants Are Risky for Children, Lancet Says

Unpublished findings showed that Paxil, Pfizer Inc.'s Zoloft, Wyeth'sEffexor and Forest Laboratories, Inc.'s Celexa were less effective, had more sideeffects or raised the risk of suicide more than reported in published studies, theLancet study said. . . .

"In view of the high risk of suicide in this group of children and youngpeople, the possibility that a drug might increase that risk without clearevidence of benefit, should discourage its use," researchers from the U.KNational Collaborating Center for Mental Health said.

A Lancet editorial said the lack of unfavorable data published aboutthese medicines and children is "an abuse of the trust patients place in theirphysicians."

"The story of research into selective serotonin reuptake inhibitor use inchildhood depression is one of confusion, manipulation and institutionalfailure," said the editorial published in the April 23 Lancet.

Antidepressant sales reached $19.5 billion last year worldwide, and arethe third best-selling medicines in the U.S., behind cholesterol-reducers andulcer drugs, according to IMS Health Inc. Pfizer's Zoloft had worldwide salesof $3.4 billion.

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"When you find that a drug company is withholding data because it willdamage market share, when you're talking about children with a high risk ofsuicide, that is potentially very serious," lead researcher Tim Kendall said in atelephone interview. "Why aren't they publishing it?"

Zoloft's unpublished data from two published trials with 376 childrensuggested the drug was less effective than reported in a published study, and mayhave increased suicide thoughts and attempts, the study said. Celexa, in twounpublished trials involving 422 children, didn't reduce depression symptomsenough to show a benefit and raised the risk of suicide attempts and side effects,the researcher said.

115. On 4/23/04, The Wall Street Journal reported:

Adding to a growing chorus, a respected British medical journal today ispublishing a study questioning the safety of prescribing most antidepressants tochildren.

Researchers writing in the Lancet are the latest experts to raise alarms thatAntidepressants may in some cases push children and adolescents toward suicide.

After reviewing published and unpublished data from drug-company trialsof the effects on children of a certain class of drugs known as selective serotoninreuptake inhibitors, or SSRIs, six British university researchers concluded thatonly fluoxetine, known by the brand name Prozac, demonstrated benefits thatoutweighed the risks.

Data on four other drugs suggested the risks of use could outweigh thebenefits. Those drugs are paroxetine, sold as Paxil, from GlaxoSmithKline PLC;sertraline, or Zoloft, from Pfizer Inc.; citalopram, or Celexa, from ForestLaboratories, Inc.; and veniafaxine, sold as Effexor by Wyeth. Effexor is aseratonin and norepinephrine reuptake inhibitor, which works somewhatdifferently than the SSRIs.

Most of the unpublished drug trials examined by the British researchersheld more negative conclusions about Antidepressants than the published trialsdid.

The researchers criticized the abundance of unpublished data, saying that"nonpublication of trials, for whatever reason, or the omission of importantdata from published trials, can lead to erroneous recommendations fortreatment."

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116. In order to try to counter adverse publicity and differentiate Celexa/Lexapro from

other SSRI depression drugs and suicidality, Forest arranged for The American Journal of

Psychiatry to publish the study Forest had conducted in mid-01 — and publicized in 12/01, 5/02,

7/02, 9/02 and 12/02 — showing that Celexa/Lexapro was efficacious in treating adolescent

depression without adverse side effects. However, within days after the 6/04 edition of The

American Journal of Psychiatry was issued, The New York Times published an explosive story

that this Forest-sponsored American Journal of Psychiatry article had failed to include or present

a much larger, more comprehensive study conducted by Forest/Lundbeck during 96-02 involving

422 children/adolescents, which demonstrated that Celexa was not efficacious for adolescent

depression, that it actually increased suicidality, that Forest had concealed this study from The

American Journal of Psychiatry, and that Forest/Lundbeck had not previously publicly released

or publicized this adverse study. As a huge public uproar erupted over this deception by Forest,

British health authorities demanded that Lundbeck/Forest surrender the secreted Celexa

adolescent study and Forest stock continued to plummet.

117. The New York Times 6/21/04 article reported:

The issue of The American Journal of Psychiatry that hit the desks of its37,000 readers this month reported test results for the antidepressant drug Celexa,indicating it could help children and teenagers.

Before publication, the article received the kind of scrutiny commonamong medical journals. The study's authors had been asked to divulge theirfinancial ties, if any, to the drug's marketer, Forest Laboratories, Inc., whichsponsored the clinical trial. And the report was sent to reviewers who examinedthe trial methodology and checked to make sure that the article reflected otherrelevant research about the use of antidepressants in youngsters.

But neither the article nor the 27 scholarly footnotes that accompanied itmentioned another major drug-industry-sponsored trial completed in 2002, whichfound that Celexa did not help depressed adolescents any more than a placebo.Nor would the article's reviewers have been likely to find any clues of that trial'sexistence. The results of that trial were first noted last year on a single line of achart that appeared on Page 96 of a textbook — one written in Danish.

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In written responses to inquiries from The New York Times, Forest statedthat the negative Celexa test, sponsored by a related company, was not mentionedin the recent article because "there was no citable public reference for the authorsto examine."

But drug makers often announce trials with positive results withoutwaiting for the results to be published. Forest, for example, issued a news releasethree years ago that highlighted the outcome of the positive Celexa trial. Thatwas shortly after the test's completion, when the findings were first presented at amedical conference, but before the study was even submitted to The AmericanJournal of Psychiatry for consideration. Three of the authors of the Celexa thugarticle in this month's issue are Forest employees.

The Celexa trial in question was run in Europe from 1996 to 2002 and wassponsored by H. Lundbeck, the Danish company that developed the drug.

A spokesman for Lundbeck said the company reported the trial results toForest, although he could not say when. Forest executives did not respond towritten inquiries from The Times seeking that information.

118. On 6/22/04, The Wall Street Journal reported:

Depression Trial Details Are Sought — Issue of Unpublished Studies Grows asU.K. Seeks Data From Study of Celexa, Kids

A team of British health officials that is developing guidelines for treatingchildhood depression asked Danish pharmaceutical company H. Lundbeck ASyesterday for details of an unpublished study on an antidepressant it makes.

The researchers, from Britain's National Collaborating Centre for MentalHealth, said they are trying to find out why the study went unpublished. Thestudy examined the safety and efficacy in children of the drug citalopram, whichis sold in Europe under the brand Cipramil by Lundbeck. In the U.S., the drug issold under the brand name Celexa by Forest Laboratories, Inc.

The request comes amid a swirling debate over the use of antidepressantsin young people and a controversy over results of studies that have goneunpublished.

Forest's stock continued to decline in light of this adverse publicity.

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119. On 6/22/04, Credit Suisse First Boston reported:

• Forest Labs [sic] recent pullback surrounds recent controversies overpediatric clinical studies in the depression area and recent disclosures byCelexa's developer, Denmark's Lundbeck .. . from publishing a clinical studyshowing a lack of efficacy in pediatric patients groups.

• . . . [A]dverse publicity is also having an adverse effect on depressiongrowth trend. Recent depression monthly new prescription activity has slowedfrom +4-5% during late 2003 to a recent flattening in the April-June perioeL

120. On 6/22/04, J.P. Morgan reported:

We think Forest is weak for two reasons: I) press attention analogous tothe fall-out of Glaxo's Paxil trials in adolescents, which showed a suicidesignal; and 2) a predictably consistent slowing SSRUSNRI market growth.

121. On 6/23/04, Wells Fargo Securities reported on Forest:

• We attribute the $4.64 (7.6%, versus 0.36% for the S&P 500) decline inthe share price of Forest Laboratories on Tuesday, June 22, to action by aBritish group requesting the data from a European Celexa study conducted byLundbeck in depressed patients aged 18 years or under that demonstrated a lackof effect for the drug.

122. Now that Forest had been exposed as concealing adverse Celexa/Lexapro studies,

it was forced to reveal another negative Lexapro study. On 6/24/04, Forest issued a release:

Forest Laboratories, Inc. Announces Results of Recently CompletedLexapro(R) Pediatric Depression Clinical Trial

Forest Laboratories, Inc. announced today the results of a recentlycompleted placebo-controlled study of Lexapro® (escitalopram oxalate) inchildren and adolescents. Patients receiving Lexapro did not demonstratestatistically significant separation from placebo in the primary efficacy measure. . . .

While Forest said this study was just "recently completed," that was not true. The study had

been completed earlier and was being concealed. "They are clearly responding to investor

concerns" about media reports and European regulatory concern over companies ignoring

negative results, said Deborah Knobelman, an analyst at ThinkEquity Partners.

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123. On 6/26/04, The New York Times reported:

Forest Laboratories has said a recently concluded test found that itsantidepressant Lexapro did not help depressed children and adolescents, anannouncement that comes amid the growing controversy over clinical drug tests.

The company's announcement is significant because Lexapro containsessentially the same active ingredient as another Forest antidepressant, Celexa,which is widely prescribed for pediatric use.

Forest's stock price continued to fall to as low as $57.10 on 6/28/04 as more artificial inflation

came out of the stock, as more truth entered the market.

124. On 6/29/04, Eliott Spitzer, the Attorney General of New York, requested that

Forest provide all documents regarding concealed clinical trials or tests and "off-label"

promotional activities for its drugs — a request which followed a highly-publicized action by

Spitzer's office against GlaxoSmithKline for improper if not fraudulent marketing of its SSRI

drug — Paxil — for adolescent use and its concealment of studies it had performed or had showing

Paxil did not work with adolescents and increased suicidality.

125. On 6/29/04, Bloomberg reported:

Forest Laboratories Inc., the maker of Namenda Alzheimer's disease drug,said the New York state attorney general's office requested any information thecompany may have about off-label clinical trials and product promotions.

The request states that State Attorney General Eliot Spitzer is concernedabout whether the company may have violated New York law, Forest said in astatement. The request isn't a subpoena and New York-based Forest said it wouldcooperate.

Spitzer's press office declined to comment. His request to Forest comesless than a month after he filed a lawsuit accusing GlaroSmithRline Plc ofwithholding negative trial results on the use of the antidepressant Paxil to treatchildren, which the company denies.

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126. On 6/29/04, Reuters reported:

Forest Labs says NY AG seeks documents on marketing

. . . Forest Laboratories Inc. said on Tuesday that New York's AttorneyGeneral is concerned that the company may be violating state law by promotingits products for unapproved uses, sending its stock lower in after-hours trading.

The New York-based drugmaker said Attorney General Eliot Spitzerrequested "any information that may exist with respect to off-label clinical trialsor promotion of its products."

127. On 6/30/04, Prudential Equity Group issued a report on Forest:

News of the Spitzer inquiry not that surprising given the fact that severalof FRX's competitors have been crying fowl [sic] for a long time on what issometimes purported to be aggressive marketing practices. The allegations arethat FRX does not follow the industry-adopted PhRMA guidelines that spell outwhat can and can't be done when marketing drug products.

128. On 6/30/04, The New York Times reported:

Forest Asked to Supply Information on Marketing of Some Drugs

Forest Laboratories said yesterday that it had received a wide-rangingrequest from the New York attorney general, Eliot Spitzer, asking for informationabout how the company tested and promoted drugs like its antidepressant Celexafor so-called off-label, or as yet-unapproved, uses.

A representative of Mr. Spitzer's office, who asked not to be identified,said that the request covered 10 products sold by Forest. But that person saidthat Mr. Spitzer is particularly interested in how Forest tested and promoted twoof its antidepressants, Celexa and Lexapro, which are widely used off-label bydoctors for the treatment of pediatric depression.

Mr. Spitzer's action follows by a week an article in The New York Timeswhich disclosed that Forest did not tell a medical journal about a failed,unpublicized trial of Celexa in children and adolescents when it published anarticle this month about a positive trial of the same drug in the same type ofpatients. Some of the article's authors were Forest employees.

On 6/30/04, Forest's stock fell to as low as $54.97, as further artificial price inflation came out of

the stock.

129. On 7/6/04, Natexis Bleichroeder Inc. issued a report on Forest. It stated:

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We have lowered our revenue and EPS estimates for Forest to reflect therecent weakness in the anti-depression market.

130. On 7/16/04, SG Cowen issued a report on Forest. It stated:

Reduced Estimates Reflect More Cautious Outlook For Lexapro

Conclusion: Reflecting a more cautious view on the multiplefundamental pressures facing Forest's antidepressant franchise, dominated by theslowing antidepressant market trends . . . we have reduced our Leacapro salesprojections for F2005-2008.

131. On 8/5/04, The Wall Street Journal reported:

FDA Revisits Issue of Antidepressants for Youths — New Analysis MayPressure Agency to Set Limit on Use Because of Suicide Risk

A new Food and Drug Administration analysis of clinical-trial data showsevidence of a link between antidepressant drugs and suicidal tendencies amongyoung people. . . .

The new analysis, which focused on 25 studies of nine drugs, found thatchildren and teenagers who took the medicines were more likely to have behavioror thoughts that appeared suicidal, compared with those who got placebo pills.

The new findings are likely to intensify pressure on the agency to considerstronger action to limit use of the drugs by young people.

The document, dated July 19, focuses on an array of antidepressant drugsincluding Pfizer, Inc.'s Zoloft, Forest Laboratories Inc.'s Celexa, Wyeth'sEffexor, GlaxoSmithIGine PLC's Wellbutrin and Paxil, and Prozac, made by EliLilly & Co. and available generically.

132. By 9/1/04, investors and analysts realized that despite Forest's prior

representation that it would file an sNDA for Memantine/Namenda for the treatment of

mild/moderate Alzheimer's disease by mid-04, Forest had not filed the sNDA and thus

Memantine/Namenda would not be approved for active marketing or sale for use in patients with

mild/moderate Alzheimer's disease, at least not in the timeframe that Forest had previously

indicated, thus restricting the available market for that drug and the potential Forest revenues

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and profits from that drug. Later, Forest did file an sNDA for Memantine/Namenda for

mild/moderate treatment of Alzheimer's, but the application was denied by the FDA as the drug

did not produce statistically significant results.

POST CLASS PERIOD EVENTS

133. On 9/7/04, Forest issued a release that it was settling its dispute with New York

Attorney General Spitzer:

Forest Laboratories Announces Adoption of On-line Registry for ClinicalStudies; Attorney General Agrees to Close Inquiry

. . . Forest Laboratories, Inc. today announced that it will establish apublicly available, on-line Clinical Trial Registry containing summaries of keyForest-sponsored clinical studies completed since January 1, 2000 for drugswhich Forest currently markets. The creation of the Clinical Trial Registry is alsopart of an agreement reached today with the New York State Attorney General.As a result of Forest's adoption of the Clinical Trial Registry, the AttorneyGeneral has agreed to end his inquiry of Forest's clinical study disclosurepractices.

This will include summaries of clinical study reports for clinical studies of the useof Celexa and Lexapro by pediatric patients. These summaries will includeresults for the protocol-defined efficacy and safety outcomes, as well as adescription of the trial design and methodology.

134. On 9/14/04, Thomas Weisel Partners issued a report on Forest. It stated:

Executive Summary

A joint FDA panel discussed antidepressant (AD) use and the potential forsuicidality in pediatric patients. Nine ADs were discussed, including Forest'sCelexa. . . .

The panel voted 25-1 that ADs may increase the risk of suicidality inpediatric patients and 27-0 that they are unable to conclude at this time that anysingle AD agent is free from risk of suicidality. Additionally, the group voted 18-5 in favor of a black box warning.

135. On 6/13/05, the Centers for Medicare & Medicaid Services (CMS), a Federal

agency within the U.S. Department of Health and Human Services, reported that henceforth

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Medicare formularies need only include Celexa (citalopram) or Lexapro (escitalopram) because

they are essentially identical. By way of explanation, CMS stated that "[dither escitalopram or

citalopram may be left off formularies since escitalopram is the component of citalopram that is

responsible for the antidepressant effect."

136. On 7/26/05, the FDA issued a non-approvable letter to Forest, denying its

application to expand the approved uses of Namenda to include moderate-to-severe Alzheimer's,

confirming that the study it submitted to the FDA was never as conclusive as defendants

represented.

INSIDER TRADING

137. During the Class Period, Forest's insiders owned and sold the following Forest

shares:

Name Date Shares Price Proceeds % Sold

Eggers 6/10/04 36,000 $61.910 $ 2,228,760 59%6/10/04 24,008 $61.910 $ 1,486,3356/10/04 10,960 $61.910 $ 678,534

70,968 $ 4,393,629

Goodman 5/12/03 400,000 $49.540 $ 19,816,000 11%5/12/03 100,000 $49.700 $ 4,970,000

500,000 $ 24,786,000

Hochberg 10/22/02 20,456 $50.000 $ 1,022,800 73%10/25/02 134,000 $48.080 $ 6,442,7201/22/04 45,000 $72.000 $ 3,240,0001/22/04 24,000 $72.000 $ 1,728,000

223,456 $ 12,433,520

Olanoff 10/22/02 69,056 $50.020 $ 3,454,181 69%2/10/04 201,728 $74.950 $ 15,119,5142/10/04 66,472 $74.950 $ 4,982,076

337,256 $ 23,555,771

Prehn 5/22/03 11,000 $50.000 $ 550,000 88%7/29/03 10,000 $48.000 $ 480,00010/23/03 1,000 $50.700 $ 50,700

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Name Date Shares Price Proceeds % Sold

10/24/03 32,000 $50.500 $ 1,616,0001/28/04 12,000 $76.400 $ 916,8001/28/04 9,600 $76.400 $ 733,440

75,600 $ 4,346,940

Solomon 10/22/02 712,080 $49.940 $ 35,561,275 37%10/22/02 170,000 $49.690 $ 8,447,30010/23/02 517,920 $48.020 $ 24,870,51810/27/03 300,000 $50.360 -$15,108,00010/28/03 400,000 $50.090 $ 20,036,00010/29/03 359,000 $49.940 $ 17,928,46010/30/03 41,000 $50.060 $ 2,052,4602/11/04 100,000 $76.020 $ 7,602,0002/12/04 300,000 $75.630 $ 22,689,0002/13/04 200,000 $74.450 $ 14,890,0002/13/04 100,000 $74.290 $ 7,429,0002/17/04 350,000 $74.400 $ 26,040,0002/18/04 250,000 $74.630 $ 18,657,500

3,800,000 $221,311,514

Stafford 10/1/02 80,000 $44.330 $ 3,548,400 50%1/26/04 75,000 $77.200 $ 5,790,000

155,000 $ 9,336,400

Triano 1/23/04 20,000 $74.570 $ 1,491,400 100%

TOTALS: $5,182,280 $301,655,174

NO SAFE HARBOR

138. Forest's verbal "Safe Harbor" warnings accompanying its oral forward-looking

statements ("FLS") issued during the Class Period were ineffective to shield those statements

from liability for several reasons. First of all, Forest, in its Class Period conference calls and

other meetings with analysts and investors, never warned that any "particular" statement was an

FLS, stating only that presentations "may" or "will" contain FLS. Second, Forest never

referenced in connection with its oral FLS any SEC filing or other publicly available documents

that contained cautionary statements, as required. Finally, the cautionary statements in Forest's

SEC filings were not "meaningful;" rather, they were boilerplate, even though the economic,

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industry and company-specific factors affecting Forest's business and its performance varied

markedly during 01-04, the purported cautionary statements contained in Forest's 10-Q and 10-K

filings with the SEC (incorporated herein by reference) were word-for-word identical — the

substance of those warnings never changed, even though Forest's business, products and the

economic and competitive environment in which it operated was constantly changing.

139. Each of Forest's 10-Q reports issued during 00, 01, 02, 03 and 04 contained the

following identical language:

Forward Looking Statements

Except for the historical information contained herein, the ManagementDiscussion and other portions of this Form 10-Q contain forward lookingstatements that involve a number of risks and uncertainties, including thedifficulty of predicting FDA approvals, acceptance and demand for newpharmaceutical products, the impact of competitive products and pricing, thetimely development and launch of new products and the risk factors listed fromtime to time in the Company's filings with the SEC, including the Company'sAnnual Report on Form 10-K for the fiscal year ended March 31, [2004].

140. Each of Forest's 10-K reports for 00, 01, 02 and 03 contained the following

identical language:

Forward Looking Statements

Except for the historical information contained herein, the ManagementDiscussion and other portions of this annual report contain forward lookingstatements that involve a number of risks and uncertainties, including thedifficulty of predicting FDA approvals, acceptance and demand for newpharmaceutical products, the impact of competitive products and pricing, thetimely development and launch of new products and the risk factors listed fromtime to time in the Company's filings with the SEC, including the Company'sAnnual Report on Form 10-K for the fiscal year ended March 31, [2004].

141. Thus, the statutory safe harbor provided for FLS does not apply to the false FLS

pleaded. The defendants are liable for the false FLS pleaded because, at the time each FLS was

made, the speaker knew the FLS was false and the FLS was authorized and/or approved by an

executive officer of Forest who knew that the FLS was false. None of the historic or present

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tense statements made by defendants were assumptions underlying or relating to any plan,

projection or statement of future economic performance, as they were not stated to be such

assumptions underlying or relating to any projection or statement of future economic

performance when made nor were any of the projections or forecasts made by defendants

expressly related to or stated to be dependent on those historic or present tense statements when

made.

CLASS ACTION ALLEGATIONS

142. This is a class action on behalf of purchasers of Forest common stock during the

Class Period. Excluded from the Class are officers and directors of the Company, as well as

their families and any entity controlled by any of them. Class members are so numerous that

joinder of them is impracticable.

143. Common questions of law and fact predominate and include whether defendants:

(i) violated the 1934 Act; (ii) omitted and/or misrepresented material facts; (iii) knew or

recklessly disregarded that their statements were false; and (iv) artificially inflated the price of

Forest common stock and the extent of and appropriate measure of damages.

144. Plaintiffs' claims are typical of those of the Class. Prosecution of individual

actions would create a risk of inconsistent adjudications. Plaintiffs will adequately protect the

interests of the Class. A class action is superior to other available methods for the fair and

efficient adjudication of this controversy.

COUNT I

For Violation of §10(b) of the 1934 Act and Rule 10b-5Against All Defendants

145. Plaintiffs repeat the allegations contained above.

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•

146. During the Class Period, defendants carried out a plan, scheme and course of

conduct which was intended to and, throughout the Class Period, did deceive the investing

public, including plaintiffs and other Class members, as alleged in this complaint and caused

plaintiffs and other members of the Class to purchase Forest stock at artificially inflated prices.

In furtherance of this unlawful scheme and course of conduct, defendants, and each of them, took

the actions set forth in this Complaint.

147. Defendants: (a) employed devices, schemes, and artifices to defraud; (b) made

untrue statements of material fact and/or omitted to state material facts necessary to make the

statements made not misleading; and (c) engaged in acts, practices, and a course of business

which operated as a fraud and deceit upon the purchasers of the Company's common stock in an

effort to maintain artificially high market prices for Forest stock in violation of §10(b) of the

1934 Act and Rule 10b-5. All defendants are sued as primary participants in the wrongful and

illegal conduct charged in this complaint.

148. These defendants employed devices, schemes and artifices to defraud. While in

possession of material adverse non-public information, they engaged in acts, practices, and a

scheme as alleged herein in an effort to assure investors of Forest's business and financial

success and prospects for continued substantial growth. This included the making of, or the

participation in the making of, untrue statements of material fact and concealing facts necessary

in order to make the statements made, in the light of the circumstances under which they were

made, not misleading.

149. This conduct artificially inflated the price of Forest stock and operated as a fraud

and deceit upon the purchasers of Forest stock during the Class Period, proximately causing

damage to the class members when Forest stock suffered statistically significant, company-

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specific declines as the truth entered the market, exposing defendants' prior misrepresentations

and other fraudulent conduct — stock declines that were not due to general market movements,

industry conditions, changed investor expectations or other company-specific information

unrelated to the alleged fraud.

150. The defendants had actual knowledge of the misrepresentations and omissions of

material facts set forth in this Complaint, or acted with severe reckless disregard of the truth in

that they failed to ascertain and to disclose such facts, even though such facts were available to

them.

151. As a result of the dissemination of the materially false and misleading information

and failure to disclose material facts, as set forth above, the market price of Forest stock was

artificially inflated during the Class Period. Relying directly or indirectly on the false and

misleading statements made by defendants or upon the integrity of the market in Forest stock,

plaintiffs and the other members of the Class purchased Forest stock during the Class Period at

artificially high prices and were damaged thereby and as the stock price declined as specified

herein, due to a series of partial revelations by which the truth entered the market over time,

resulting in a significant stock price decline.

152. At the time of defendants' misrepresentations and omissions, plaintiffs and other

members of the Class were ignorant of their falsity. Had plaintiffs and the other members of the

Class and the market known the truth which was not disclosed by defendants, plaintiffs and other

members of the Class would not have purchased their Forest stock, or, if they had acquired such

stock during the Class Period, they would not have done so at the artificially inflated prices

which they paid, or suffered the damages they did when the stock price declined for specific

reasons related to the fraud, proximately causing Class members' damages.

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153. As a direct and proximate result of defendants' wrongful conduct, plaintiffs and

the other members of the Class suffered damages in connection with their respective purchases

and sales of the Company's stock during the Class Period.

COUNT II

For Violation of §20(a) of the 1934 Act AgainstDefendants Forest, Solomon and Goodman

154. Plaintiffs repeat the allegations contained above.

155. Individual Defendants Solomon and Goodman acted as controlling persons of

Forest within the meaning of §20(a) of the 1934 Act as alleged in this complaint. By virtue of

their high-level executive positions, and their ownership and contractual rights, participation in

and/or awareness of the Company's operations, accounting policies and methods, and/or intimate

knowledge of the false financial statements filed by the Company with the SEC and disseminated

to the investing public, these Individual Defendants had the power to influence and control and

did influence and control, directly or indirectly, the decision-making of the Company, including

the content and dissemination of the various statements which plaintiffs contend are false and

misleading. Individual Defendants Solomon and Goodman were provided with or had unlimited

access to copies of the Company's reports, press releases, public filings and other statements

alleged by plaintiffs to be misleading prior to and/or shortly after these statements were issued

and had the ability to prevent the issuance of the statements or cause the statements to be

corrected.

156. In particular, each of these Individual Defendants had direct and supervisory

involvement in the day-to-day operations, and in the accounting policies and practices of the

Company and, therefore, each is presumed to have had the power to control or influence the

particular transactions giving rise to the securities violations as alleged in this Complaint, and

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exercised the same. The Company controlled all the Individual Defendants and all of its

employees.

157. As set forth above, defendants each violated §10(b) and Rule 10b-5 by their acts

and omissions as alleged in this Complaint. By virtue of their positions as controlling persons,

defendants Solomon, Goodman and Forest are liable pursuant to §20(a) of the 1934 Act. As a

direct and proximate result of defendants' wrongful conduct, plaintiffs and other members of the

Class suffered damages in connection with their purchases of the Company's stock during the

Class Period.

II

For Violation of §20A of the 1934 Act AgainstDefendants Solomon, Hochberg, Stafford and Prehn

158. Plaintiffs repeat the allegations contained above. This Count is brought pursuant

to §20A of the 1934 Act on behalf of all purchasers of Forest common stock during the Class

Period.

159. Defendants Solomon, Hochberg, Stafford and Prehn, by virtue of their positions

as officers and directors of Forest, had access to, and were in possession of, material non-public

information about Forest at the time they sold millions of shares of Forest common stock during

the Class Period.

160. By virtue of their participation in the scheme to defraud investors described in

Count I and their sale of stock while in possession of material, non-public information about

Forest, defendants violated §10(b) of the 1934 Act and applicable rules and regulations

thereunder.

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161. The chart below details defendant Solomon's sales of Forest common stock made

contemporaneously with plaintiffs purchases of shares of Forest common stock:

Date Sold Shares Plaintiff Purchase/Settlement Date Shares10/27/03 300,000 Teamsters Affiliates Pension Plan 10/29/03 100

Teamsters Affiliates Pension Plan 10/29/03 200

10/28/03 400,000 Teamsters Affiliates Pension Plan 10/29/03 1,500

10/29/03 359,000 Teamsters Affiliates Pension Plan 11/03/03 200

Teamsters Affiliates Pension Plan

Teamsters Affiliates Pension Plan

10/30/03 41,000 Teamsters Affiliates Pension Plan

162. The chart below details defendant Hochberg's sales of Forest common stock

made contemporaneously with plaintiff's purchase of Forest common stock:

Date Sold Shares Plaintiff Purchase/Settlement Date Shares01/22/04 45,000 UNITE H.E.R.E.Staff Retirement Fund 01/23/04 1,500

01/22/04 24,000 UNITE H.E.R.E.Staff Retirement Fund

163. The chart below details defendant Stafford's sales of shares of Forest common

stock made contemporaneously with plaintiffs purchase of shares of Forest common stock:

I

Date Sold Shares Plaintiff Purchase/Settlement Date I Shares 01/26/04 75,000 UNITE H.E.R.E. Staff Retirement Fund 01/29/04 1,300

164. The chart below details defendant Prehn's sales of shares of Forest common stock

made contemporaneously with plaintiffs' purchases of shares of Forest common stock:

Date Sold Shares Plaintiff Purchase/Settlement Date Shares

10/23/03 1,000 Teamsters Affiliates Pension Plan 10/28/03 100

10/24/03 32,000 Teamsters Affiliates Pension Plan 10/28/03 200

Teamsters Affiliates Pension Plan 10/28/03 2,000

Teamsters Affiliates Pension Plan 10/29/03 100

Teamsters Affiliates Pension Plan 10/29/03 200

Teamsters Affiliates Pension Plan 10/29/03 1,500

01/28/04 12,000 UNITE H.E.R.E. Staff Retirement Fund 01/29/04 1,300

01/28/04 9,600 UNITE H.E.R.E.Staff Retirement Fund

-91-

165. Plaintiffs and all other members of the Class who purchased shares of Forest

common stock contemporaneously with sales of Forest common stock by defendants: (i) have

suffered substantial damages because, in reliance on the integrity of the market, they paid

artificially inflated prices for Forest common stock as a result of the violations of §10(b) of the

1934 Act and Rule 10b-5 as alleged in Count I; and (ii) would not have purchased Forest

common stock at the prices they paid, or at all, if they had been aware that the market prices had

been artificially inflated by defendants' false and misleading statements and concealment. At the

time of the purchases by plaintiffs and the other members of the Class, the fair and true market

value of the Forest common stock was substantially less than the price paid by them.

PRAYER FOR RELIEF

WHEREFORE, plaintiffs pray for relief and judgment, as follows:

A. Determining that this action is a proper class action, certifying plaintiffs as class

representatives under Rule 23 of the Federal Rules of Civil Procedure and designating this

Complaint as the operable complaint for class purposes;

B. Awarding compensatory damages in favor of plaintiffs and the other Class

members against all defendants, jointly and severally, for all damages sustained as a result of

defendants' wrongdoing, in an amount to be proven at trial, including interest thereon;

C. Awarding extraordinary, equitable and/or injunctive relief as permitted by law,

equity and the federal statutory provisions sued hereunder, pursuant to Rules 64 and 65 and any

appropriate state law remedies to assure that the Class has an effective remedy;

D. Awarding plaintiffs and the Class their costs and expenses incurred in this action,

including counsel fees and expert fees; and

E. Awarding such other and further relief as the Court may deem just and proper.

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•

JURY DEMAND

Plaintiffs hereby demand a trial by jury.

DATED: August 12, 2005 LERACH COUGHLIN STOIA GELLERRUDMAN & ROBBINS LLP

SAMUEL H. RUDMAN (SR-7957)

11111111117

4111bo SAMUEL H. RUDMAN

20e : si ollow Road, Suite 406Melville, NY 11747Telephone: 631/367-7100631/367-1173 (fax)

LERACH COUGHLIN STOIA GELLERRUDMAN & ROBBINS LLP

WILLIAM S. LERACHMATTHEW P. MONTGOMERY401 B Street, Suite 1600San Diego, CA 92101Telephone: 619/231-1058619/231-7423 (fax)

CUNEO GILBERT & LaDUCA, L.L.P.JONATHAN W. CUNEOHARRIS L. POGUST507 C Street, N.E.Washington, DC 20002Telephone: 202/789-3960202/789-1813 (fax)

Attorneys for Plaintiff

SAcasesSD\forest labs\CPT 00023408 Cons Amd.doc

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CERTIFICATE OF SERVICE

I, Kelly A. Stadelmann, hereby certify that on August 12, 2005, I caused a true

and correct copy of the attached:

Amended Complaint For Violation Of The Federal Securities Laws

to be served by first-class mail to all counsel on the attached service list.

•

bliAjgad-te/MOL(-elly A. Stadelmann

_

FOREST LABSService List - 8/11/2005 (05-0062)

Page 1 of 2

Counsel For Defendant(s)Gary W. KubekDebevoise & Plimpton LLP919 Third AvenueNew York, NY 10022

212/909-6000212/909-6836(Fax)

Counsel For Plaintiff(s)

Evan J. Smith Jonathan W. CuneoBrodsky & Smith, LLC Harris Pogust

240 Mineola Blvd., 1st Floor Cuneo Gilbert & LaDuca, L.L.P.Mineola, NY 11501 507 C Street, N.W.

516/741-4977 Washington, DC 20002610/667-9029(Fax)

202/789-3960202/789-1813(Fax)

Michael Goldberg Vincent M. GiblinGlancy Binkow & Goldberg LLP Kroll Heineman Giblin1801 Avenue of the Stars, Suite 311 Metro Corporate Campus ILos Angeles, CA 90067 99 Wood Avenue South, Suite 307

310/201-9150 Iselin, NJ 08830310/201-9160 (Fax)

732/491-2100732/491-2120(Fax)

Bruce G. Murphy William S. LerachLaw Offices of Bruce G. Murphy Matthew P. Montgomery265 Llwyds Lane Lerach Coughlin Stoia Geller Rudman &Vero Beach, FL 32963 Robbins LLP

772/231-4202 401 B Street, Suite 1600772/234-0440(Fax) San Diego, CA 92101-4297

619/231-1058619/231-7423(Fax)

-

FOREST LABSService List - 8/11/2005 (05-0062)

Page 2 of 2

Samuel H. Rudman Steven G. SchulmanDavid A. Rosenfeld Peter E. SeidmanMario Alba, Jr. Milberg Weiss Bershad & Schulman LLPLerach Coughlin Stoia Geller Rudman & One Pennsylvania PlazaRobbins LLP New York, NY 10119200 Broadhollow Road, Suite 406 212/594-5300Melville, NY 11747 212/868-1229(Fax)

631/367-7100631/367-1173 (Fax)

Eric J. Belfi Marc A. TopazPaul T. Curley Richard A. ManiskasMurray, Frank & Sailer LLP Tamara Skvirsky275 Madison Avenue, Suite 801 Schiffrin & Barroway, LLPNew York, NY 10016 280 King of Prussia Road

212/682-1818 Radnor, PA 19087212/682-1892(Fax) 610/667-7706

610/667-7056(Fax)

David R. Scott Arthur L. Shingler IllNeil Rothstein Amy K. SabaErin G. Comite Scott + Scott, LLCScott + Scott, LLC 401 B Street, Suite 307108 Norwich Avenue San Diego, CA 92101Colchester, CT 06415 619/233-4565

860/537-5537 619/233-0508(Fax)860/537-4432 (Fax)

Jules Brody Joseph H. WeissAaron Brody Weiss & LurieTzivia Brody 551 Fifth Avenue, Suite 1600Stull, Stull & Brody New York, NY 101766 East 45th Street, 4th Floor 212/682-3025New York, NY 10017 212/682-3010(Fax)

212/687-7230212/490-2022(Fax)